Commercial - Frequently Asked Questions

FAQs

Q: Should I sell or rent my commercial property?

This will depend on the circumstances of the property owner and whether they are looking for a longer-term rental return or to release capital from the property. If generating regular income is of more importance, then securing a long-term tenant may be preferable. In some cases, renting the property first and then offering it for sale as a tenanted investment would attract greater levels of interest. Alternatively, smaller commercial premises may achieve a better sale price if offered for sale with vacant possession as they may appeal to owner occupiers. We can provide impartial advice to ensure that the value of your property is maximised.

Q: Should I sell my commercial property in the current market?

This is a question we are probably asked most frequently. Unfortunately, we cannot predict the future, but we are currently experiencing high levels of demand for small industrial units, shops in busy high street locations and good quality freehold investments.

Q: How are commercial properties valued both to lease and sell?

Commercial properties are generally valued on a pounds per sq ft basis, with consideration for market comparable sales or lettings. Tenanted properties are usually considered on an investment basis with an appropriate investment yield. The market rent of shops is calculated slightly differently where the rent is considered In Terms of Zone A, which is essentially a way of comparing shops of different shapes on a comparable basis given the front of a shop is generally more valuable than the rear.

Q: What security should I get from a tenant at the start of the lease?

It is essential that comprehensive checks are carried out on prospective tenants. Where the tenant has an existing business, we would request the last 3 year’s business and if a new business is proposed, a director’s guarantee should be secured. In addition, a rent deposit is requested (usually 3 month’s rent) although this will depend on the strength of the tenant’s business. We also carry out complete credit and identity checks on all prospective tenants

Q: How long do I have to commit when renting a commercial property?

This can vary from property to property and hence it is always worth asking the agent. Often this is negotiable but will state on the marketing particulars if not. Usually we would expect a minimum term of 3-5 years.

Q: What is a lease premium on a commercial property?

A premium usually applies where there is expected to be exceptionally high demand for the lease. This could be down to the use class (i.e a restaurant), goodwill, a below market rent on the lease or due to contents and equipment.

Q: What is a tenant typically responsible for when renting a commercial property?

Terms may be agreed on a full repairing and insuring basis whereby the tenant is responsible for all internal maintenance and a fair proportion of the external/structural building maintenance and a share of buildings insurance. Sometimes the external maintenance costs may be recovered by way of a service charge. Alternatively, terms could be agreed on a strictly internal repairing and insuring basis.

Do you have a question you would like us to answer? If so, please email us at commercial@maggsandallen.co.uk