COVID-19 has changed everything. The way we interact with people, the way we think about things and of course the way we work.
For many people, the last time they saw the inside of their office was back in March 2020 when restrictions were first announced and orders to work from home were issued.
As time has moved on, it has become abundantly clear that coronavirus is here to stay for a while yet, which indicates the reopening of offices may be off the agenda for the foreseeable future.
Although commuters might celebrate this news, what about businesses which own the freehold land or property which their companies used to operate from?
“Everything seems to be very bleak at the moment, but opportunities can be made from almost any situation,” says Dean Williamson, director of LW Developments.
Sale and leaseback
“For any businesses wanting to free up some cash, while also retaining their location, there’s a very simple solution. Sale and leaseback is a great way to raise capital from the property but remain in the premises, as you can then rent it back from the developer.”
This approach can be beneficial for both the buyer and seller and is usually an alternative to standard bank financing. The seller receives a lump sum of cash quickly, and the buyer acquires an income producing property with long term development potential.
Selling up completely means the business can relocate and take on serviced, flexible office space if and when needed, avoiding the need to tie in for a long lease.
Alternatively, part of the property or land could be redeveloped and if the business still requires a site then it could occupy a smaller part of the original property.
Only recently, permitted development rights have changed, making it easier to convert, extend or demolish some commercial properties for residential use. This is because the Government has recognised that there is and will continue to be a rise in surplus commercial stock.
This means that many empty office spaces can now be used more efficiently, such as for residential use in a bid to plug housing shortfall.
“With many businesses now operating a remote working model, it’s likely offices are going to sit vacant for a long time, so why burden yourself with having to maintain the property? Selling up to raise finance could be a great move,” says Dean.
“They do not have to be straightforward sales either. Option agreements or joint ventures could be another route too, these will largely depend on a business’s timing requirements and tax implications.
“I think COVID has changed our working practices and workplace commitments forever. When restrictions ease, we might start to see a partial return to the workplace, or differing schedules to avoid too many people mixing. I think changes are afoot, so maybe now is the time to start thinking pragmatically about whether you really need to keep hold of your office space.”
Freehold land or property owners who would like to discuss their options should get in touch with LW Developments on 01992 447 713 or email firstname.lastname@example.org
Dean Williamson MRICS