Commercial Properties to Let: What UK Landlords and Tenants Need to Know

A Comprehensive Guide to Letting Commercial Property in the UK

Whether you are a landlord looking to let your commercial property or a business seeking the perfect premises, understanding the commercial property letting process is essential. Commercial leases operate differently from residential lettings, with various legal, financial, and practical considerations. This guide outlines the key steps for letting commercial property, what landlords and tenants should look out for, and how Fraser Bond can assist in the process.

Types of Commercial Property to Let

Commercial properties come in a variety of forms, each suited to different types of businesses. Some of the most common types of commercial properties available to let include:

1. Office Spaces: Suitable for companies needing a professional workspace, office spaces vary widely in size and style, from shared workspaces to large corporate headquarters.
2. Retail Units: Retail premises include shops, boutiques, and other storefronts. These properties are often located on high streets, shopping centres, or in retail parks.
3. Industrial Units: Industrial properties cater to businesses involved in manufacturing, storage, or logistics. These units typically include warehouses, factories, and distribution centres.
4. Leisure and Hospitality Venues: Properties for hotels, restaurants, gyms, or entertainment facilities fall under this category, often requiring specific zoning and planning permissions.

Key Considerations When Letting Commercial Property

Letting commercial property, whether as a landlord or a tenant, requires careful planning. Here are the main factors to consider:

1. Lease Terms: Commercial leases are typically longer than residential ones, often ranging from 3 to 25 years, depending on the property type and the tenant's needs. It's important for both landlords and tenants to negotiate favorable terms, including:

   • Rent Reviews: Many leases include provisions for rent reviews, which allow the rent to be adjusted at set intervals (usually every 3 to 5 years) based on market conditions.
   • Break Clauses: Break clauses give either party the option to terminate the lease early under specific conditions. These clauses offer flexibility, especially in uncertain markets or growing businesses.
   • Repair and Maintenance: Commercial leases usually operate under full repairing and insuring (FRI) terms, meaning the tenant is responsible for repairs and maintenance as well as insurance costs. It's essential to clarify these responsibilities at the outset.

2. Business Rates: In addition to rent, tenants are responsible for paying business rates—a tax on non-residential properties. The amount is determined by the rateable value of the property, which is set by the Valuation Office Agency (VOA) in the UK. Before signing a lease, tenants should understand how much they will be paying in business rates and whether they qualify for relief schemes, such as small business rate relief.

3. Zoning and Planning Permissions: Landlords and tenants must ensure that the property is suitable for the intended business use. Commercial properties are subject to use classes in the UK, which determine what types of businesses can operate within the space. For example:

   • Class E: Includes retail, office, and leisure uses
   • Class B2: Covers industrial uses
   • Class C1 and C2: Applies to hotels and care homes

   If a tenant wishes to change the use of a property, they may need to apply for planning permission from the local authority.

4. Location and Accessibility: The location of a commercial property is a key factor in its success. For retail businesses, foot traffic and visibility are crucial, while industrial properties need good access to transportation networks. For office spaces, proximity to clients, employees, and amenities should be considered. Tenants should also assess parking, public transport links, and accessibility for customers or employees.

5. Energy Performance Certificate (EPC): Landlords are legally required to provide an Energy Performance Certificate (EPC) when letting commercial property in the UK. The EPC rates the energy efficiency of a building and is valid for 10 years. From April 2023, properties with an EPC rating of F or G cannot be let, meaning landlords may need to make energy improvements before marketing the property.

6. Deposit and Financial Security: Commercial leases often require a rental deposit as security for the landlord, typically ranging from 3 to 6 months' rent. Tenants should ensure they understand the terms of the deposit and any other financial guarantees required, such as a personal guarantee from business owners.

Steps for Landlords Letting Commercial Property

For landlords, finding the right tenant is crucial for securing a long-term, reliable income. Here are the steps landlords should take when letting commercial property:

1. Prepare the Property: Before marketing, ensure the property is in good condition and meets all legal requirements, such as fire safety regulations and accessibility standards.

2. Set the Right Rent: Determine a competitive rent by researching the local market. The rent should reflect the property's location, size, and condition, while also factoring in the type of tenant you're looking to attract.

3. Market the Property: Work with a commercial property agent to market your property effectively. Listings should include high-quality photos, detailed descriptions, and key information such as size, location, and amenities. Fraser Bond’s experienced team can help landlords reach the right audience through targeted marketing campaigns.

4. Screen Potential Tenants: Conduct thorough background checks on potential tenants, including reviewing their financial status, business plans, and credit history. This reduces the risk of letting to a tenant who may default on rent or fail to meet their lease obligations.

5. Negotiate the Lease Terms: Work with your tenant to negotiate favorable lease terms, ensuring clarity on rent reviews, break clauses, and repair obligations. Professional legal advice is essential during this phase to ensure the lease is fair and complies with current regulations.

Steps for Tenants Seeking to Let Commercial Property

For businesses looking to rent commercial property, securing the right space can have a significant impact on operations and growth. Here’s what tenants should do:

1. Assess Your Needs: Consider the size, location, and layout that your business requires. Think about future growth and whether the space will accommodate changes in staff numbers or operations.

2. Budget for Total Costs: In addition to rent, factor in business rates, utilities, insurance, and any service charges. Make sure the total cost is manageable within your business’s budget.

3. Visit Properties: Visit multiple properties to compare them before making a decision. Look beyond the aesthetic appeal to assess the practicality of the space and how it fits your business model.

4. Negotiate Lease Terms: Negotiate lease terms that suit your business needs, including rent-free periods for fit-outs or favorable break clauses. Having legal representation during negotiations can help ensure your interests are protected.

How Fraser Bond Can Assist

At Fraser Bond, we specialize in helping both landlords and tenants navigate the complex commercial property market in the UK. Our services include:

• Marketing and Lettings: For landlords, we offer targeted marketing strategies to attract the right tenants and ensure properties are let quickly.
• Tenant Sourcing and Screening: We help tenants find properties that match their business needs and assist landlords in finding trustworthy, long-term tenants.
• Lease Negotiation: Our experienced team provides guidance on negotiating lease terms, ensuring both parties secure favorable agreements.
• Ongoing Property Management: We provide full property management services to ensure smooth operations and maintenance once a lease is in place.

Contact Fraser Bond today to learn how we can assist with your commercial property needs, whether you're looking to let, find a tenant, or secure the ideal space for your business.