Commercial Rent Reviews Achieving a Rent Reduction
For many businesses, especially that in the retail, services, and hospitality sectors, premises costs and the level of rent being paid can be a critical factor in the profitability or even survival of the business.
Landlords are being inundated with requests for rental reviews and while most are taking a pragmatic approach even the most sympathetic landlord will look at a number of key factors in determining their position towards a renegotiated level of rent:
1. Does the business have a future?
If you present your landlord with the impression that your business is under grave threat with no reasonable prospect of survival they may well make the decision that they should be looking for a new tenant. You must show that you have a realistic business plan in place which will guide your business through its current difficulties.
2. Is the business being run as cost-effectively as possible?
No landlord can be expected to subsidise cost inefficiencies within your business. You must be able to demonstrate that you have fully reviewed your cost base and implemented all available savings.
3. Has the business addressed its marketing needs?
While cost savings are effective to a point, as a business owner you must also be satisfied that you are doing enough in terms of your marketing effort. For example if you have repositioned your business as a low cost / low margin operator or have a new range of discount price products / services then this needs to be communicated to the market. It is vital for the survival of any business that you are in touch with your customer’s needs and tailor your marketing and sales to meet these needs.
4. Does the business have the support of its bankers and other creditors?
A landlord will not want to see themselves as solely bearing the cost for a downturn in your business. Owners should show evidence of financial commitment to the business by themselves, their bank and their main suppliers.
Significant rental savings can be achieved for the short to medium term where tenants can demonstrate the viability of their proposals to their landlord. While no landlord wants to see their property vacant in the current climate it is not enough for tenants to blame the economic downturn for their own specific problems or simply threaten to vacate the premises.
Before arranging a rent review you must be able to address the above issues in a professional manner and your arguments should be supported by up to date accounts information accompanied by financial projections for at least the next 6 – 12 months.
A successful rent review will not only result in a short term saving on your business’ rental costs but should also form the basis for a better working relationship with your landlord going forward.
Amatino Partners regularly represent their clients at rental reviews. If you require advice in relation to preparing your submission or representation at the review itself please contact us in our Cavan office 049 4371211 or our Monaghan office 047 84955 or email firstname.lastname@example.org.