Rethinking Commercial Property in a Post-COVID World: Key Considerations for Flexible and Resilient Leasing in the New Supply Chain Landscape
Whilst Covid-19 is becoming a distant memory for many of us the impact that it had on supply chains and the way we look at Commercial Property was profound. In a time when many of us were forced online for our purchases, when supply chains were been stretched to their limit and bottle necks were created – what became clear is a significantly greater emphasis on warehouse space. Both from a manufacturer and a distribution perspective. In truth the trends where already there before Covid when you look at the cost of warehouse space compared to the traditional blue chip Commercial Property portfolios of retail spaces and office spaces. World events in the post Covid-19 era have only increased this divide further. It is becoming increasing noticeable the scale of warehouse development adjacent to the spine of the road networks across the UK. The question though is what you need to consider in relation to your existing Commercial Property portfolios or if you are considering a new acquisition.
Published: November 13th, 2024
6 min read
In the legal world we now find ourselves perhaps the greatest benefit you could have is flexibility. Is it more beneficial for you to have a shorter lease term, or, could you negotiate a longer term but with break clauses that will allow your manufacturing processes to be more reactive to events should the need arise. What about the option to lose space or gain space, again depending on market conditions. Knowing exactly what you can do, what you can’t do and when are important to the stability of your business and, if we see another disruptive event like Covid-19, would make you agile and could give you a competitive advantage.
There is also the rent aspect that should be considered. If supply chain problems completely disrupt your manufacturing / distribution operation – what options do you have regarding the rent. Can you negotiate yourself a window of reprieve in such emergencies? If not then even if your processes grind to a halt your obligations in the lease (which could potentially include maintenance and repair – which is also a cost) will still need to be complied with.
It is also worth considering what the Commercial Property is being used for. What caveats are there within the lease about its use? How wide is that permitted use clause? How easy would it be to change? Having some foresight about what could be manufactured or stored on site will obviously make a difference to those negotiations, whether it be a new lease or a renewal lease. That’s not including external factors that need to be considered such as planning permission or restrictive covenants on the legal title. There is obviously a balance that needs to be found between the parties on matters such as this. It is clear that landlords will generally not want you to have carte blanche over what you can do with a site and that is entirely fair enough. That being said, you do not want to draft yourself into a corner and remove that flexibility and agility referred to above. There are compromises to be found and the benefits to be gained for both parties.
For further information please contact Matthew Jones