The commercial property market globally is in a state flux, with the retail industry still searching for the balance between high street and online, and the office market adapting to demands for a more flexible approach to both space and lease terms. For both landlord's and tenants, their is much uncertainty as the landscape continues to evolve.
There are a number of benefits when using a commercial agent to find suitable commercial premises. Firstly by using a firm to represent you will add more credence and show you are serious in wanting to acquire suitable premises. This specifically applies to individuals and start-up companies, as landlords will appreciate that they are serious as they are taking professional advice. It is important for successful overseas companies with no UK presence to use the services of an acquisition agent to provide them with the knowledge of the UK market and the best locations to start out.
Generally, it is a better idea to employ a local firm with specialist knowledge if you are looking in a specific location. However, if you are keen to acquire a number of units (for example a chain of shops or restaurants), there are several large commercial agents who have knowledge and experience of the entire country. In this instance, it really depends on what your requirements are and the reputation and expertise of the firm. Smaller agents may have more in depth knowledge of the best retail pitches and market rents for a more localised area, but will lack the overall countrywide experience that bigger companies and firms often provide.
The initial meeting with the acquisition agent deals specifically with the search criteria and this is usually where you’ll get an idea as to what the agency’s level of experience is. Typical points to cover will include the preferred location, type and size of property, price range, timing and any specific requirements, for example parking, air-conditioning, layout etc. You’ll also discuss fees, which is an important aspect of the process. These can often be tailored and can vary in range although usually they are either based on a percentage of the headline rental value or are a percentage of the purchase price. The rates tend to vary from between 1 per cent to 2 per cent plus VAT for a property purchase, depending on value of the property being purchased. For the acquisition of a rental property, the standard fee is 10 per cent plus VAT of the agreed annual rent. This is generally a one-off fee whether the new lease is for a term of three years or 25 years. This fee is usually only applicable in the event of the agent finding a suitable property; however there is normally an abortive fee or an upfront fee to cover costs incurred.
Upon receipt of instruction, the acquisition agent will begin contacting all active commercial agents in the location of the search and will also directly approach property owners, including property companies and investment groups. This contact base is priceless and in addition the agent will also have access to a number of internet property sites only available to commercial agents.
Access to the Land Registry and off-market properties also further increase the chances of acquiring a site and really do depend on the skill of the agency chosen. Off-market opportunities are like gold dust and these are usually only known to those in the industry.
While in some cases the search may yield an instant result, more often it tends to be an on-going process that can take months. At all times, communication is key and it’s vital that the agent updates the client with all suitable opportunities. In addition to sourcing the property, the acquisition agent's role also involves checking the measurements of the property to ensure that you acquire what you are paying for while also providing assistance in ensuring that the legal documentation is completed within the prescribed timescale. In addition, the majority of agents, especially if they are part of a firm of Chartered Surveyors, will be able to carry out structural surveys, schedules of conditions or other professional services, which is often an added benefit as these can sometimes be required during the process.
Although it can be a lengthy and often difficult process, having experienced professionals on your side can be invaluable. Think very carefully before choosing to scrimp in this area.
About the author
Richard Cleminson joined Kinleigh Folkard & Hayward in 1986 and founded the firm's commercial property division in 1990.
Richard provides expert advice on all aspects of buying and selling commercial property and all related professional work, including valuations, rent reviews and lease renewals. In addition he deals with a great deal of acquisition work for retailers, office occupiers, investors and developers and also advises clients looking to buy or sell commercial and mixed use development opportunities.
He has nearly 20 years post qualification experience dealing with commercial valuations for retail, office, industrial and development properties. Within that time he has been actively involved in commercial agency and has a thorough understanding of the market conditions throughout that period.