The Office for National Statistics reports the economy grew by 1.9% on average in 2013 and we all know there are many areas of the UK not performing as well as the greater Bristol area so we can assume we may be doing slightly better than that.
It is good news but for businesses one effect the new optimism will have is to nudge the commercial property market more in favour of landlords than tenants.
Since 2007 tenants have enjoyed having the whip hand in the relationship with landlords. Unless the property was the best-located and best-specified landlords feared that they may not find a tenant in a market that was steadily getting worse year on year.
That meant they would accept shorter leases, more frequent break clauses, lower rents and give away long rent free periods and other incentives to secure tenants. At Bruton Knowles we anticipate landlords having the confidence to be more bullish in their negotiations, reducing incentives and that translates into higher rents in real terms.
Since 2007 three-year break clauses in leases have become very popular as many businesses lacked the confidence to sign up for a property for long periods. That means many break clauses can be actioned this year and with the improving market it is in the interests of tenants to get in early and negotiate early before the market picks up any more and landlords get even more confident.
There is nothing to fear in exercising a break clause if you do it properly. Effectively the negotiations can set one of the main overheads for a business for a long period. Setting your rent now is akin to buying shares at the bottom of the market. If all the indicators and predictions of the Government are correct then rents are going to rise soon, and quickly.
In the greater Bristol area the second hand office market with premises suitable for small businesses still has a range of space on offer for business, but better quality and larger offices in prime locations are in short supply.
For small businesses that need to have some warehouse and storage space alongside their offices there is a real lack of suitable small industrial units locally so securing one of these at a good rental level could be a real competitive advantage for a small business.
Of course exercising a break clause and reconsidering your property needs can be fraught with traps for the unwary or inexperienced and that is where we can come in and help. It is also worth considering the businesses own expansion plans in a growing economy.
The size of a premises can either restrict growth or encourage expansion so it is important to do some calculations to work out what your needs will be over the lifetime of the lease. Nobody wants to be rattling around in space that they are not using but similarly if you expand and have to take on new premises in a hurry then you are likely to have to pay a high price for the lack of planning.