Published date: 28 November 2024
7 top tips to help you unlock hidden value in your leased estate
Author: David Elstob, Head of Lease Advisory, NHS Property Services
Did you know that only 3 in 10 estates and finance leaders see lease negotiations as relevant to supporting their capital needs in delivering estates strategy?*
That could mean that as much as 70% of leaders are not currently realising the possible indirect funding opportunities offered by lease negotiations. This blog offers 7 top tips to prepare you for getting the most from negotiations with landlords to unlock capital and improve revenue affordability.
Are you extracting the most value from your leased estate?
By taking a strategic approach to your lease negotiations, you could make significant funding gains, depending upon your needs. For example, capital contributions to fit outs, help with running costs, or even service charges and energy efficient upgrades. Because of the sheer opportunity, I really think lease negotiations should be a key part of delivering every estate strategy.
7 top tips for landlord negotiations
- Develop your options
Consider possible alternative options and the adaptability of each to deliver your operational needs. Developing an options appraisal, weighted based on your priorities, will help you evaluate. Consider a property’s suitability and any necessary changes you need to make so it will meet your future needs. Such costs could be mitigated by asking for landlord contributions through negotiations. - Conduct a full financial analysis
Analyse the financial implications and compare options, considering both immediate and long-term costs, including VAT and stamp duty. Understand the legal structure and balance sheet impact of each option. Understand what liabilities might impact you during the lease term and when the lease expires.
- Engage as early as possible
Where you are intending to renew an existing lease, early engagement with your landlord will improve your negotiating position. This means more leverage and the opportunity to fully explore value release with your landlord. This gives you the best chance to ask for a contribution to your costs or reduce your liabilities. - Negotiation is not just about rent
Include service charges and overall building maintenance costs in your negotiation. Make sure there is a clear agreement on responsibilities and costs, both now and in the future.
An NHS funded occupier gives security of income to landlord. Even where rents are relatively low, do not feel as if you cannot ask. We advised one GP practice in Greater Manchester ICB to ask for a contribution to energy efficiency upgrades form their landlords. The practice received a contribution of £85,000, which they had not anticipated when renewing their lease. Often landlords will offer rent free periods, but ask for a capital contribution if that will better serve your needs.
- Don’t be scared of a longer-term lease
Consider agreeing to a longer-term lease during negotiations. This could secure better incentives from the landlord, such as capital investment for refurbishments. This can enhance your service delivery and enable better patient care. Landlords too
might be more willing to invest to meet your specific needs. - Consider the long-term legal and cost implications of your negotiations
Make sure your consultants and legal team are aligned to provide the best commercial advice on proposals, contracts and property lifecycle costs. Make sure that service charge costs are relevant to the nature of your occupation, particularly if taking space in a converted property, Heritage asset or shopping centre. - Ensure you have the necessary skills on board
Make sure you have the right skills in your team to assist with negotiations and discussions with developers and landlords. The earlier you are able to acknowledge where support is needed, the better, as it can take time to bring external resources on board. To find out more about our Lease Advisory service click here.
“We had to do a commercial lease negotiation. As hospital acute care providers, it’s not necessarily our core business, not something we have a lot of expertise to pull on,”
Stephen Bennett, Head of Strategy and Partnerships, Warrington and Halton Teaching Hospitals Trust.
Get more detailed insight
This is just a sample of the advice and guidance you can find in our new guide to NHS Estate Funding to help you get the most from your funding options. Including step-by-step guidance, a checklist, and examples of what you may want to look to negotiate in your lease.
We gathered experts across NHSPS to share their knowledge and experience of NHS estate funding to help you feel confident in accessing different capital and revenue funding sources. Including landlord negotiations, developer contributions, DHSC/NHSE programme capital, opting to tax and more.
Want help with your negotiations?
As your lease advisory partner, we can offer a bird’s eye view across your portfolio. Helping to spot opportunities that best support your estate strategy and drive down your costs. We’re also able to help with specific needs - whether you’re looking to extend, break or exit a lease, or reduce void space. All while best supporting your long-term interests, and the NHS’. Find out more about our Lease Advisory service. If you'd like any support, please get in touch. Or you can even join the team, here.
*That’s what our recent survey with the Health Service Journal (HSJ) told us. Full report here.
