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How start-ups are transforming the commercial property landscape

The rapid growth and rising influence of innovative, flexible start-ups in the technology, media and creative sectors are changing the way commercial landlords operate across the UK. As a result, traditional landlords are being forced to adapt, or insulate themselves against the evolution of the commercial property landscape.

Driving changeDukes-TechStartups

According to the Financial Times, tech, media and creative industries have been the fastest growing sectors in the last five years, and their commercial property demands differ greatly from traditional businesses.

Writing in London Loves Business, Headspace Group MD Jonathan Rosenblatt highlights their need for flexibility, both in terms of space and lease terms, as growth can be unpredictable. They also have a strong desire to cluster with similar businesses, and seek out property that can incorporate informal spaces like coffee bars, breakout areas and games zones.

Such companies are also influencing the commercial property demands of larger, more traditional businesses. Savills associate director Paul Bennett told the FT: "TMT [technology, media and telecoms] has really changed the way other sectors work, now they’ve got to do something more fun.”

Enabling evolution

Interestingly, the same innovative tech companies are enabling landlords to change. Startups.co.uk has identified the property market as a key growth area for tech companies in 2014 and 2015, particularly by challenging property rental models by accessing clients directly, by monetising property in different and flexible ways, and by simplifying bill sharing.

FTSE 250 property company Workspace is a prime example. 95% of their tenants are tech companies, who they engage with regularly to adapt to their needs. They also run City Workspace, a scheme that offers clients individual membership to shared office spaces across London.

Adaptation and insulation

Signing short-term leases doesn't always mean losing security, as there are trade-offs that can benefit landlords too. Rent deposits, first refusal clauses giving the client access to new space when it opens up, and bondable ('triple net') leases are all traditional ways that landlords can protect against more volatile tenants.

It's also wise to ensure invoicing processes are as watertight and efficient as possible, and have enforcement measures in place should the worst case scenario arise. If you want further advice on how to recoup late commercial rent arrears, without scaring off tenants, talk to one of our advisors today.

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