Thinking of renting or buying commercial property? How does Brexit affect you?

26
Dec

It seems as though the Brexit bombshell has left a cloud of uncertainty behind. The insecurity stemming from this will have far reaching consequences, one of which is the impact on the commercial property market in London. Business confidence has been dented which in turn has put a hold on investments and impacted the property market. As Laith Khalaf, senior analyst at Hargreaves Lansdown said: “The dominos are starting to fall in the UK commercial property market, as yet another fund locks its doors on the back of outflows precipitated by the Brexit vote. It’s probably only a matter of time before we see other funds follow suit…These managers will now be adding to the supply of commercial properties on the market, which is likely to put downward pressure on prices.” As scary as this can all sound, it’s important not to panic and work out how this affects you, and how this can work to your advantage. To help you we’ve put together a brief list of potential “what if’s” for you to consider:

What it means for you if you’re looking at renting a commercial property.

  • You could start to see a decrease in prices.
  • More properties coming on the market within your price range.
  • Areas more salubrious that previously weren’t affordable to you are now within your spending reach.

So what should you do?

  • Get to know the market. Keep your eyes peeled at market prices, what’s happening with properties similar to your own?
  • Take your time. The downward pressure isn’t all going to happen in the next few months. It will be progressive and unless your need to move is extremely urgent then try to hold off a little and play the waiting game.
  • Have markers on your favourite hotspots. Always had your eye on a location that’s previously been unaffordable? The more expensive areas are likely to see sharper decreases. Start canvasing property consultants.*
  • Content where you are? Research the drop in prices and ask your current landlord for your rent to be matched to these prices. After all, if you’re a great tenant, why does your landlord want to go through all the trouble of getting a new one with the reduced rental rate.
  • Know what you want. In negotiating, be specific about what you want to pay and the terms of the contract, don’t just leave this to the landlord.
  • More than money. Ensure you come out with more than just a good price, break-clauses, rolling notice period, rent-free periods are all things that are as highly valued as cheap rent, and you’re probably more in a position to ask for now than previously.

What it means for you if you’re wanting to buying a commercial property.

  • You could buy now only to see the value of the property drop even further in the next six months.
  • You may find your lenders are not so happy to sign off with ease on the mortgage your previously thought you’d get.
  • Sellers could begin to apply pressure on you to go through with a sale based on Brexit nerves.
  • Gradually more and more properties may start to come on the market as confidence drops. 


So what should you do?

  • Sit tight. It could be advisable to sit it out, no-one really knows with certainty what will happen next.
  • Negotiate. If you can’t sit it out, push for the best deal you can. Your seller is probably very keen to have something secured, and they are also worried about the uncertainty.
  • Get more for your money. With prices predicted to fall yet again, perhaps incorporate this in your offer.
  • Keep calm. Do things at your own pace, don’t hasten any negotiations because of your property seller’s nervous Brexit twitch.
  • Provide your lenders with sufficient financial information giving them confidence that you have thought this through.** 

KEY POINTS:
*Use a specialist property consultant. They are worth their fee… and then some! They know the market and they know how to leverage your position to your advantage. They will see through scare tactics. Many consultants charge a fee based on the amount they can save you so they have a natural incentive to help you.  At Ten Forward we have a number of clients in the property consultancy market so speak to us for some recommendations.

**Forecasting. Here at Ten Forward we specialise in helping businesses look forward rather than back.  We can prepare numerous what if scenarios in very simple formats that are easy to understand and easy to change. Your bank or lender will be reassured to see key financial data with forecasts and assumptions. We have significant experience in dealing with financial institutions; we know what they want to see!  Also, do you want to see the following in easy to read forecast?

  • What if your rent costs go up or down? How will this affect the cashflow and P&L?
  • Can you afford to buy a property? What will the monthly payments be? How will this affect your cashflow?
  • What if interest rates go up next year? How will this affect lending?


Our forecasting is affordable and easy to work through. Click here to book a quick demonstration or talk to one of our management accounts.




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