|Issue||Office building surplus space required lease surrender negotiations|
|Project Manager||Stephen Head|
0118 955 7089
Early lettings achieved for surplus office space; reducing initial relocation costs & capital expenditure
Our client, the Charitable Trust of a major London hospital, purchased an 18,000 sq. ft. office building in Maidenhead town centre. The property was substantially refurbished in 2007 and was fully let. However, 3 floors of the building were occupied by a pharmaceutical company which, in the intervening period, was then acquired by a larger competitor for whom the property was surplus to requirements. Negotiations for a lease surrender ensued and favourable financial terms were agreed. However, our client took on the risk of a potential letting void when the market was only starting to slowly recover from recessionary conditions.
Hicks Baker was asked how best to position the property in order to achieve early lettings to minimise the letting (and rental) void. We recommended quoting a rent level just below that being quoted by a number of other new and modern buildings on the market at the time. The intention was to attract strong interest from the outset, but also to prepare the ground for deals without significant rent-free concessions, thus creating an income stream for the Trust as soon as possible. The major factor to be addressed was the presentation of the space which had already been substantially fitted out by the pharmaceutical company. Would the offices be more attractive as ‘plug and play’ accommodation capable of immediate occupation, or would it be better to strip out the existing layout and revert to a landlord’s typical Cat A finish? After analysing competing buildings in Maidenhead and taking soundings from a selected number of occupiers, it was decided to keep the offices as they had been left. The condition and standard of the fit-out and furniture was of a very good quality; the layout provided facilities suitable for most modern office users giving occupiers the opportunity to substantially reduce initial relocation costs and capital expenditure.
A successful marketing campaign was devised around these key messages which resulted in the letting of all three available floors totalling 10,392 sq. ft. within 12 months. Each letting was achieved at the quoting rent and with minimal rent-free periods. For the new occupiers, the key differentiator which attracted them to the building was the ability to make substantial savings on the usual capital costs of relocating. The careful positioning of Chatsworth House also enabled the tenants to move into the premises almost immediately without the long lead-in times normally associated with the fitting-out of landlord’s space.Download PDF