Five years after rents collapsed, are young negotiators up to the challenge?

In June, September and December 2008 respectively, three settlements on identical 14,000 sq ft floors of quality Mayfair offices in Queensbury House, Old Burlington Street, evidenced the true fall in the office rental market either side of the Lehman collapse in September 2008.

The agreements were for £102/sq ft in June 2008, £78/sq ft in September and £68/sq ft in December. My firm handled the last one.

At least 90% of leases are on five-year patterns, whether break clauses, reviews or expiries. And so, these same negotiations now resurface.

Almost five years from June 2008 to June 2013, landlords have not been able to gain increases on reserved rents, and the “rent boys” — those in surveying professional departments - have been busying themselves on lease expiry, break clause and lease restructuring negotiations.

However, from this month onwards, rent reviews will be back in force, not only on prime Mayfair offices negotiated from December 2008 onwards, but virtually all over central London, and even, in some cases, in the regions.
The market fell further in 2009 and, therefore, 2014 increases ­ especially if the market continues at its present strength ­ will bring battles between landlords that expect full market rental values and tenants fighting their corner.

Many tenants who took grade A offices in the best locations, which were relatively cheap in 2009 and 2010, will face increases they cannot afford in 2014 and 2015 respectively, and may have to exercise break clauses or exit when the lease expires.

Those who have committed to longer leases may be in the fortunate position of being in a market where demand will exceed supply, and, despite the higher rents now prevailing, assignments will be possible.
Landlords may even be tempted to take surrenders for open market reletting.

What is needed now are rent negotiators with experience. Clearly, perhaps with the exception of the writer and a handful of others, most of the doyens of the industry who were active in the 1970s and 1980s have cast down their tools, but a few senior rent review and lease renewal specialists are still around, sharing their experience with the next crop, who are in their forties and fifties.

Let’s call them the middle-market rent review specialists, who cut their teeth mainly through the meteoric rises in rental values from 1997 to 1999 and 2005 and late 2007/early 2008.

However, many of those guys moved to different departments in their firms, when there was not enough rent review work around, and now there is a shortage of good surveyors who know how to run an arbitration or court case.

Game on

As far as the next batch are concerned — let’s call them the youngsters — they probably only had a year or two as assistants before the market collapsed in late 2008. They will have to learn quickly to be able to cope with the abundance of work emanating from this phenomenon.

I forecast in 2010 that this renewed workload would return in December 2013, and now I wonder how many firms have trained and increased their workforce to cope with the activity.

I hope that the service given to clients, whether landlord or tenant, is as good as it was when we didn’t have this helter-skelter situation, whereby the rent review market was closed for almost five years and then reopened with a vengeance.

Ewing House, Brentwood CM14

Major media occupier clients,  holding lease on 18,000 sq ft offices, until June 2018 with rent review and break clause June 2013, were undecided on relocation.

After extensive negotiations, the landlord enticed the tenant to stay in occupation, offering a rent free equivalent of approximately 9 months, and for breaking.

The tenant did progress relocation negotiations, which were aborted in view of the Landlords last minute proposal.

On balance, a benefit of the rent free vs. the cost of fit out, the balance swung in favour of continued occupation to the existing facility.

Professional | Anthony Lorenz | Kathryn Sowter

112-113 New Covent Garden Market & Timbermill Way, Clapham

For Liberty Wines, we acquired a site to develop their new 26,000 sq ft warehouse and office facility, close to their previous HQ in New Covent Garden Market.

Professional | Anthony Lorenz

Cut a Deal - 45 Conduit Street, London W1

Hairdressers, Daniel Hersheson, sought our advice to renew lease on some 4,000 sq ft of retail space on Conduit Street, where a 25% saving was gained from the Landlord’s quoting rent.

The settlement of this extensive retail unit, being achieved at £205 per sq ft Zone A.

Professional | Anthony Lorenz

48 Albemarle Street, London W1

The owners approached us to secure vacant possession of the 2^nd and 3^rd floor offices from a Tenant who enjoyed Landlord and Tenant rights, although they have been holding over for 4 years in a rising market.

The back rent, used following agreement, persuaded the Tenant to accept a premium, which was less than statutory compensation, to give up their renewal rights, and vacate so that our client could proceed with development plans, which the Tenant could have held up for a year and a half.

A satisfactory outcome indeed.

Professional | Anthony Lorenz 

6th Floor, Berger House, Berkeley Square

Long established client, Seven Seas Maritime, approached lease expiry and after extensive negotiations with the Landlord we renewed their lease on some 2,940 sq ft a rent of £67.50 per sq ft with a rent free period.

Rent frees are often available on lease renewals.

Professional | Anthony Lorenz | Andrew Knights

57,000 sq ft Office Surrender, Chertsey

Our major media Corporate Occupier client, held a lease on some 57,000 sq ft of non occupational offices, with 2 sub-tenants who were both outside the Landlord and Tenant Act.

They faced approximately £2.2m worth of outgoings until the end of their lease, to include dilapidations and the Landlord offered to take a surrender at £1.4m.

It seemed low and something was obviously wrong.

Via inspection, we ascertained that the Landlord was re-letting to our Client’s sub-tenants, who were both outside the Landlord and Tenant Act, expiring 3 months before our Client’s lease.

The Landlord could not achieve his aims without our Client surrendering, and not only did we negotiate a free surrender but also the Landlord paid our fees.

Professional | Anthony Lorenz | Kathryn Sowter 

12 Hobart Place – All’s Well that Ends Well

Our Clients, Libra, headquartered at 13/14 Hobart Place, received a break notice from the Landlord, to terminate their lease on overflow offices at 12 Hobart Place as from October, partly for the Landlord’s own occupation, and partly for re-letting.

Our Clients were intent on renewing the entire building, comprising 4,445 sq ft, and after fierce negotiations renewed until October 2020, subject to mutual break clauses, at 7% higher than the rent they were paying, with 4 ½ months’ rent free period, subject to a 2 year contribution to accommodate the Landlords in alternative offices at, under £50,000 per annum.

The rent free period covered the contribution.

So all in all, our Clients ended up renewing at the rent they were previously paying, despite the fact that they initially faced being thrown out on the street.

Agency | Anthony Lorenz | Anthony Epenetos | Andrew Knights 

LORENZ INSTRUCTED TO LET 'GRADE A' ACCOMMODATION IN LANDMARK BUILDING - 45 SEYMOUR STREET W1

YORK HOUSE, 45 SEYMOUR STREET

LONDON W1

GRADE A FULLY FITTED “PLUG AND PLAY”

OFFICE TO LET

COULD BE SUITABLE FOR SHOWROOM USE SUBJECT TO PLANNING AND LANDLORDS CONSENT

APPROXIMATELY 4,808 SQ FT

Ready to move in without expense

   Location

This impressive headquarters building was developed by British Land in 2007 and is just a short distance from Portman Square which offers a variety of high quality office and residential accommodation surrounded by well known retailers, restaurants and hotels. The property is within a short walk from Marble Arch, Bond Street and Baker Street underground stations.

Accommodation

The availability comprises some 4,808 sq ft situated on the ground floor on the east wing of this modern premier development offering a ‘wow factor’ double height reception. The suite is of Grade A specification accessed directly from the main reception lobby and provides a self contained, fully fitted “plug and play” floor. The existing fit out is to a very high standard and comprises  a spacious open plan area, 3 large offices, 3 meeting/board rooms, fully fitted kitchen and demised male/female toilets..

 The high quality furniture in situ can be made available by separate arrangement.

 Amenities

        ·        Air conditioning                           ·      Fully fitted to very high standard    

·      Double height reception area     ·      Demised Male and Female WC’s

·      Concierge                                   ·      Good floor to ceiling height throughout

·      Raised floor                                ·      Good natural light

·      24 hour security                         ·      Access 24/7

   Lease                                                                                                            
   Lease by arrangement                                                                                    

   Rent
  £59.50 per sq ft (£286,076 per annum) exclusive of all other outgoings
                                        
  Rates Payable                                                                                               
  Approximately £30.60 per sq ft (£147,125 per annum)                                     
                                                                                                   
  Service Charge                                                                                          
  Approximately £10.50 per sq ft (£50,484 per annum)                                        

                                                                                                                    

Units 1&2 Twyford Place, High Wycombe

BSkyB held 2 units on this building, comprising about 8,000 sq ft, in a completely dilapidated state for another 7 years, with potential outgoings of over £1.0m, being completely unlettable without a full refurbishment.

Through extensive negotiations with the Landlords, they were surrendered at a discount, almost 30% to the total outgoings.

These were the Landlord's problems rather than our Clients.

Professional | Anthony Lorenz | Kathryn Sowter

PART 1ST FLOOR, 1 BAKER STREET, LONDON W1

Following the acquisition of the new Elemis London HQ at 1 Baker Street , in July 2012 we successfully sub-let surplus space for them comprising some 1,235 sq ft to Modacs Ltd for a term until August 2014 at an annual rent £45.00 per sq ft exclusive. 

Agency | Andrew Knights | Anthony Epenetos

Gallery Acquisition – 55 South Audley Street, W1

In July 2011 Carlson Gallery Ltd engaged us to find suitable gallery premises in Mayfair. After inspecting several “on market” and “off market” opportunities they finally agreed a lease on circa 3,000 sq ft over the ground and LG floors at 55 South Audley Street, a prominent unit with large frontage near the junction with Mount Street, previously occupied by Mansour Carpets. A 10 year lease was agreed at a competitive rent and we successfully negotiated a sizeable rent free incentive in a market where most Gallery occupiers are paying large premiums to secure retail premises.

Agency Acquisition | Anthony Epenetos | Andrew Knights

4th Floor, Manor House, 21 Soho Square, London W1

See Group Ltd contracted The Lorenz Consultancy to dispose of this self-contained building comprising approximately 22,000 sq ft of office accommodation.
After extensive negotiations with multiple corporate occupiers, the decision was made for See Group Ltd to stay in occupation of the ground and 1st floors and to only dispose of the vacant upper floors, comprising approximately 10,500 sq ft.
In March 2012, we successfully let the 4th floor to Hireworks Ltd, comprising 3,301 sq ft at an inclusive annual rent of £180,000 for a term expiring in February 2017.

Agency Disposal | Andrew Knights

3RD FLOOR, 6 BROOK STREET, LONDON W1

Resource Europe Management Ltd had a break clause in their existing lease on some 2,500 sq ft at 10 Brook Street which they subsequently exercised in order to downsize with them only needing 500 – 1,000 sq ft. We successfully found them space 2 doors down at 6 Brook Street whereby we successfully acquired the 3rd floor comprising 577 sq ft for a term of 5 years subject to a Tenant only option to determine at the 3rd anniversary of the term at an annual rent of £35,000 per annum inclusive of service charge.

Agency Disposal | Andrew Knights

Kew Bridge Road, Brentford

Settled 21,000 sq ft dilapidations claim for Landlord in Brentford at approximately £8 per sq ft.

Professional | Anthony Lorenz 

Unit 8, The Terraces, Brighton

The Lorenz Consultancy was instructed on behalf of Brighton Seafront Regeneration Limited to negotiate this restaurant rent review overlooking Brighton Seafront and The Palace Pier.
The rent review proceeded to an Independent Expert determination, where the rent was increased from £70,000 per annum to £113,500 per annum.

Professional | Kathryn Sowter

28 Baker Street, London, W1

On behalf of Loftus Family Property, we negotiated the 25 March 2010 rent review of the Betfred unit at 28 Baker Street, where the rent was increased from £52,000 per annum to £59,000 per annum.

Professional | Kathryn Sowter

23 Woodstock Street, London W1

A long standing client of the firm, Bonhams, instructed The Lorenz Consultancy to negotiate the June 2011 lease renewal of their office premises, situated adjacent to the main Bonhams site.
A new 5 year lease was agreed subject to mutual break options from March 2014.

Professional | Kathryn Sowter

Fountain Court, Oxford Spires Business Park, Kidlington

The Lorenz Consultancy were retained by Eskmuir Properties to negotiate the lease renewal of offices on this Oxfordshire Business Park. The Tenant, Thames Valley Policy, occupy some 15,000 sq ft in the subject building, together with other buildings on the Park. We negotiated a 10 year lease, with a Tenant option to break in year 5 at a rent of over £200,000 per annum.

Professional | Anthony Lorenz | Kathryn Sowter

24/25 Mount Street, London, W1

We were appointed on behalf of Frelene Limited to negotiate the rent review of the Marc Jacobs unit on Mount Street. This prestigious retailing street in Mayfair has seen significant rental increases in recent years and this trend was reflected in the rent which was reviewed from £120,000 per annum to £310,000 per annum, equating to £345 per sq ft Zone A.

Professional | Kathryn Sowter