It’s a real privilege to have been asked by BQ to write a monthly column. Two things close to my heart are property and profitability (and I’m quietly confident I’m not alone here) so in the months to come, the plan is to work through various issues to help readers critically question their property occupancy costs and ultimately make savings to maximise their profits.
As such, I’d like to open by welcoming any submissions related to property cost issues. The idea is not to respond directly to the reader but use the example as a theme for a column on a non-disclosed basis so that we can all gain the benefit of real life examples applied to property occupancy.
We all in business need to maximise profit, especially in the present period of austerity. This means looking at all of the expenditure of the business and finding what costs can be levered down.
I am often shocked that some businesses have never looked critically at their property occupation costs, rather assuming wrongly that these are a ‘given’, that there is nothing to be done but to accept what is offered.
Some businesses, again wrongly, think that the quickest way to reduce operating costs is to reduce staff. May I make a plea to those of that mind-set? In my experience, the people making up that business are the most important, valuable assets. My plea is of course formed from a profit motive, but I also think that there is a moral and ethical approach that is just, if not more, important.
Research has shown that by cutting costs other than staff, the profitability of the business can be improved, for example, extraction and minerals by 11% and retail by 17%.
It seems to me to be an oxymoron that staff costs are usually the first to be cut. Other costs should take priority and property occupancy is a major area for cost savings that can have a more immediate and positive impact on profitability.
Some years ago the Royal Institution of Chartered Surveyors (RICS) commissioned research from Capital Economics, which reported that in the UK about £13bn costs were being wasted by businesses not addressing their property occupancy costs either at all or on a regular basis. Think of all the money wasted!
Over the coming weeks I will, unless a reader’s query takes precedence, pick a subject to guide on what and how property costs might be saved. My themes will relate to taking property, managing it, adapting it and moving out. All have costs associated and which if not addressed when taking a lease have serious financial consequence that could damage the wealth of a business.
I will also along the way offer some guidance of where to get information. For example the Code for Leasing Business Premises provides clear guidance to landlords and tenants on the issues that need to be addressed to remove ambiguity and gives greater clarity to the terms of the lease. This is now in its third edition and I am proud to say I had the pleasure of chairing the working party that produced the second edition which remains a significant part of the publication.
If you have a property matter you’d like help with, please email me at firstname.lastname@example.org and it will be dealt with within this platform with guaranteed anonymity. I look forward to hearing from you.
Kevan Carrick is a partner at JK Property Consultants in Newcastle.