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With demand for commercial units at record levels businesses are being urged to think before they leap into new commercial agreements

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With a surge in demand for commercial units pushing occupancy rates to their highest level since records began, businesses are being warned to think before they leap into new premises and commercial agreements.

As a result of the coronavirus pandemic and Brexit the UK has seen a huge rise in demand for warehouse space and commercial units resulting in take up of UK logistics space in 2020 exceeding that of any year on record.

Driven by a number of factors, including increases in online shopping, which now accounts for 30% of retails sales and has increased by 21% since the start of 2020, and 1 in 4 of the population claiming to have a side hustle - commercial space is now at a premium.

With availability at an all-time low, businesses are being warned not to leap into new commercial agreements without first taking time to think and negotiate suitable flexible terms.

Kate Bullen, partner in the commercial property team at Stephensons, said: “Demand for commercial property and light industrial units is very high at the moment and we’ve seen an increase in enquiries from people seeking such spaces.

“The pandemic has acted as a catalyst and the e-commerce boom, as more people turn to online shopping, has resulted in massive demand for goods from consumers and subsequently increased demand for commercial space to hold these goods.

Daniel Crawshaw, a director at Parkinson Real Estate, highlights market conditions: “Generally, across the North West, we have seen a surge in demand for commercial units, both small and large.

“Smaller units have really seen a dearth of availability over the past 12 months and rents have also increased. Increased values have also resulted in viability of some development sites improving allowing them to be developed for small units. The supply however still remains behind demand at present.

“The pandemic and the accelerated shift towards online retail has certainly had a dramatic impact, and whilst we do expect to see this sudden growth in demand begin to plateau over the coming months, we expect strong overall demand to continue.”

These market conditions require extra caution explains Daniel. Businesses desperate for additional space and a perceived lack of available options can sometimes lead to deals being rushed through and the finer details overlooked.

Kate added: “Taking on commercial space is an exciting step for any new or growing business, and it is easy to make mistakes that could impact on your business at a later date. Not knowing how to negotiate a commercial lease is challenging for any business owner.

“I urge start-ups and entrepreneurs who may be taking out a commercial lease for the first time to look carefully at the small print of their lease agreement and to get the right advice in order to avoid common pitfalls.”

Here Kate gives her top five tips for businesses negotiating a commercial lease for the first time:

  1. Find the commercial property that is right for your business, considering the location and sq. ft, and talk to other business owners who have premises here about their experience.
  2. Understand your repairing obligations and limit your liability where the property is in a poor state of repair.
  3. Be prepared to act quickly so have evidence of funding available for your landlord or their agent to review.
  4. Negotiate the best deal possible for the commercial lease.
  5. Get legal advice at an early stage.