In our Property Insight series, our agents share their knowledge on what’s happening in the world of commercial property and land agency. From what’s trending in the Midlands market to what landlords, tenants, investors and developers need to know, we reveal our expert opinion.
In this Q2 edition, our Directors, Jason Hercock and Abi Bradley share their insight on where property management can mitigate risk and unlock investment value…
“The current climate has caused a shock to the market with inflationary pressures causing rising lending rates,” says Jason. “Whilst we expect this to be short term, and recede in the latter part of the year, it does have the potential to create serious, medium- to long-term effects on the lettings and sales markets for commercial property. Developers and landlords are strongly advised to seek professional property management advice to understand the strategies that can be implemented to gain value and mitigate risk.
“One of the most common pitfalls is overlooking communal areas, so anything from plant rooms, WCs, lifts and stairwells to lighting, landscaping and roadways. On new developments especially, there is a general lack of understanding of what it takes to set up, manage and maintain these, as well as the obligations for both tenants and landlords. For example, if an office building was split with separate ground and first floor tenants, which tenant is responsible if the roof leaks or there’s a heating system failure?
“To maintain the best asset value over time, our advice is to engage an experienced managing agent as early in the process as possible, ideally at planning stage. This will ensure the development is set-up correctly, including signed Deed of Covenants for all tenants. It might seem like I’m stating the obvious but it’s surprising that these aren’t always in place.
“This early engagement also helps set a management structure i.e. limited company and shareholdings, for ongoing maintenance. Tenants and owner/occupiers benefit from cost clarity and the reassurance that communal areas will be maintained to a high standard while developers have a robust framework for recovering costs. All of which leads to a more seamless transition when the final unit is sold and management of the development is handed over,” adds Jason.
Abi continues: “A further recommendation is to seek management advice from an agency with a qualified accounts team. Not only will they be well-versed in service charge management but they will also be able to advise on robust methods of management, such as sinking funds, that can help avoid unexpected, and costly, expenses. There are also opportunities to reclaim VAT on costs associated with communal areas, provided they are opted to tax, so seeking the correct advice from the outset could represent significant savings.”
For advice on your property portfolio, contact Jason on 01455 559030.
