Negotiating a retail lease during covid

[jxm28788]

Looking to make an offer on a retail unit, but just unsure as to what is acceptable in terms of the offer.

The rental price is pre-covid so obviously I can make a lower offer on that, but is already very low compared to basically everywhere, so I'm not sure how far I should push it (40%, 50%, 60%?).

Do commercial landlords tend to get put out if you go with too much of a low ball offer, or do they tend to just come back with "this is our minimum"?

Also, the place could do with a coat of paint and needs flooring. Is it reasonable / normal to ask them to put some flooring down and paint it? (again remembering that the rent is very low already)

 

[dotcomdude]

Do commercial landlords tend to get put out if you go with too much of a low ball offer, or do they tend to just come back with "this is our minimum"?

A shop that we wanted for a lower rent was subsequently empty for 10 years, so they don't always seem to act rationally.

Also, the place could do with a coat of paint and needs flooring. Is it reasonable / normal to ask them to put some flooring down and paint it? (again remembering that the rent is very low already)

I'd say make this part of your offer. You do the flooring and the paint. Just agree a discount for the first x weeks/months. This is what we did, then at least we got to choose how it looked.

 

[Darren_Ssc]

There are plenty of vacant shops and offices near me and the general attitude with landlords is that they'll stay that way for 100 years unless you pay what they ask.

Of course, there are exceptions and it's always worth trying to negotiate. They can only say no.

 

[alan1302]

So you want what is already a cheap rent, up to 60% less and want it to be painted?

 

[jxm28788]

So you want what is already a cheap rent, up to 60% less and want it to be painted?

I've never rented a retail unit before so I don't know what is reasonable or normal (ie. asking for it to be provided in a minimum fit state), and given that the rent was a pre-covid rent and that retail has now moved from slowly dying, to intensive care and may die completely in the next few years I'm also asking what is a reasonable offer to make.

Sure offering half price may seem extreme. or maybe it doesn't. The (pre-covid) advertised prices are also up 30% on what they were being offered at last year. It's not like people are going to be queuing up trying to out bid each other on one of several empty units in the row. Would the landlord rather have some money rather than no money? Would they rather have one less empty unit to make the others look more valuable? The landlord also does have slightly smaller units that are 60% cheaper around the corner, but none are currently empty.

I'm just asking the question. (and hopefully getting answers from people that have actually negotiated with landlords in the past or currently and therefore have some experience of this)

 

[Darren_Ssc]

I'm just asking the question. (and hopefully getting answers from people that have actually negotiated with landlords in the past or currently and therefore have some experience of this)

I think the best thing to do is to offer what you think is a fair price, what percentage that is of the original asking price is irrelevant. If you are obviously taking the mickey then expect a hostile response but if your offer is fair and reasoned then expect it to be considered professionally.

In these matters you are dealing with different kinds of people from absolute professionals to complete idiots. Some will have worked hard to be owning the property, some will have had it fall into their laps. You can, therefore, not predict what response you'll get.

So long as you are fair and professional, that is all anyone can expect.

 

[jxm28788]

I think the best thing to do is to offer what you think is a fair price, what percentage that is of the original asking price is irrelevant. If you are obviously taking the mickey then expect a hostile response but if your offer is fair and reasoned then expect it to be considered professionally.

In these matters you are dealing with different kinds of people from absolute professionals to complete idiots. Some will have worked hard to be owning the property, some will have had it fall into their laps. You can, therefore, not predict what response you'll get.

So long as you are fair and professional, that is all anyone can expect.

In this case the landlord is a large heritage estate that owns half the town... The problem I have is deciding what is fair and what is taking the micky...

Without covid obviously I'd go in just under the asking price, but post covid retail units are clearly going to be worth a lot less going forward, so a substantial discount could be considered "reasonable". But I'll put an offer in and see what they say.

 

[Darren_Ssc]

In this case the landlord is a large heritage estate that owns half the town...

.... But I'll put an offer in and see what they say.

I sympathise, but good luck anyway.

 

[Mr D]

If they don't accept what you consider fair then walk away. Leave the unit for the next person to offer on.

 

[jxm28788]

I sympathise, but good luck anyway.

I would have thought that they're more likely to be fair, as opposed to a landlord with a single property? It's their job to look after the estate and they're going to be less attached to any specific property.

 

[Darren_Ssc]

I would have thought that they're more likely to be fair, as opposed to a landlord with a single property? It's their job to look after the estate and they're going to be less attached to any specific property.

Hard to say, but they don't need the money so could be pig-headed? I wouldn't let that deter you though.

 

[Bluejen84]

It would be unreasonable to ask for aesthetic work to be done and also ask for cheap rent. The rent is likely cheap as they accept it needs some work...work for you to do.

I've always got rent free periods while works being done though. Do the work if you want it to be your place. Roll up your sleeves and make it yours.

 

[MOIC]

Negotiating will depend on the length of the lease offered (both sides).

I would say a reasonable offer from a potential tenant on a 3 year term would be the following:

1. 20% reduction on pre virus rentals for the first year.

2. Rent free for the first 6 months (to be implemented at the end of the term).

From that point, negotiate as best you can that ticks your boxes.

The longer the lease term, the more strength you will have to negotiate a better deal.

Get a competent solicitor on board.

 

[Alison Moore]

It depends how long it's been empty for, and how many other empty properties are in the area. If it's only recently been vacated and the landlords know it will be filled again soon, I wouldn't go into too low as they're think you're not a suitable tenant. However, if it's like a lot of high streets, with loads of empty shops then the landlords will be more likely to take a low offer to get it filled. Be wary of the terms of the lease though - with rate reviews and the like as you might see your a higher rent increase on the next rate review if you go in low.

 

[BristolBiz]

If your landlord has many other properties in the vicinity, accepting a lower rent can have significant effect on the rest of their properties, both in terms of future rental income in the area and of the value of their properties if they want to sell.

So, don't be totally surprised if they won't negotiate - but all you can do is try!

 

[In need of help]

I’m in a similar situation, however I wAs happy with price and it was then soon going to agree heads of terms, then virus came along so need a rethink as it’s in beauty industry a already saturated market and now mega effected with virus

since then nothing has moved along heard nothing from surveyor since beginning of c19 but I am dealing with council So that takes for ever at best of times, been a 7 month process just getting to this stage

while I know effect of rental market price change won’t happen straight away , with council there was no negotiation with rent at that time, however hoping when they get back I will ask. For a rent free period or reduction.

in the meantime I will just wait and see, it was to be used in the beauty sector which is a hugely effected business, so I’m quite happy just waiting and see how things turn out, And whether I wish to proceed in that line of business

my dream was always to have my own salon, was until recently Self employed in a salon with over 4 k followers on Instagram, that I had built up in a short period of time, the salon owner was recently was wanting me to sign a contract Limiting where I could work couldn’t and while it’s a saturated market I do myself have a USP.

I love my job and it never felt like hard work but I’m just hoping to wait about and see what happens,

 

[Supercoach]

You will not know where you stand until you make your first offer.
In this market some landlords will be happy if the business rates are covered and will accept a fairly nominal rent; certainly the very least on offer will be a rent-free period and the unit being bought up to specification. Remember, you will almost certainly be required to bring the unit to pristine condition when vacating irrespective of the condition you occupied it in.

You are in a buyer's market and apart from a rent-free period the very least you should demand at the present would be a break clause. This is imperative if things do not work out in the economy and if the 'experts' don't know how the economy will shape up in the future why would you? The ability to be able to walk away with limited exposure to long-term financial commitments is crucial.

Given your inexperience ( and understandable nervousness) in this field I would hire a surveyor specialising in negotiating rents in your locality. The fees involved will save you a lot of money and please use a good commercial solicitor to ensure you get the lease conditions that best suit you.

The use of professionals will only enhance your credibility in the eyes of a prospective landlord and will ensure that you get the best deal you can without the stress of doing it yourself.

 

[Mr D]

Landlords are also businesses and have been impacted by Covid.
So no guarantee they will agree changes or give reductions.