Case Study

Question 1

What is the rateable value of your case study building?

Answer 1

£84,500

Question 2

What was the passing rent per annum for the third floor?

Answer 2

£172,724 per annum (exc)

Question 3

What was the EPC rating on your case study?

Answer 3

D 77

Question 4

When did you agree Heads of Terms?

Answer 4

June 2017

Question 5

When did the lease complete?

Answer 5

August 2017

Question 6

What was the retail use on the ground floor?

Answer 6

One unit was A1

One unit was A2

Question 7

What is LG7 compliant lighting.

Answer 7

LG7 stands for lighting guidance 7 and it is a standard of lighting.

Question 8

What air conditioning was in your building?

What does that stand for?

Answer 8

VRF

Variable Refrigerant Flow

Question 9

What are the differences between VAV and VRF/VRV?

Answer 9

VAV is more expensive but provides more flexibility.

VRF/VAV is cheaper but has higher running costs

Question 10

What was the service charge in you building?

Answer 10

£10.41 PSF

Question 11

What were the rates payable psf?

Answer 11

Estimated at £14.19 psf

Question 12

What was the timing for completion agreed in the Heads?

Answer 12

20 working days from receipt of legal documentation

Question 13

What rent free was agreed?

Answer 13

10 months initially plus a further 5 months if the break in the 5th year was not exercised.

Question 14

When was the rent commencement date?

Answer 14

The earlier of completion, possession or 12 weeks from the receipt of legal documentation.

Question 15

When did the last letting complete in your building?

Answer 15

The last netting was in March 2016.

Question 16

Why did you not use the previous lettings as comparable evidence when re-assessing the rent for the third floor?

Answer 16

When reassessing the rents for the floor I first had regard to the previous lettings in the building however the most recent letting was in April 2016 at close to the quoting rent which I was reassessing. The client was well informed and fully aware of the recent lettings so I decided to compile some more recent comparable evidence to reflect more accurately the current market conditions.

Question 17

What was the marketing budget?

Answer 17

I retained quotes for various different marketing initiatives which came to approximately £10,000 however, I initially advised my client that enough exposure to be generated by spending less than half that much using a selection of the options. The overall spending came to approximately £6,000 by the time I disposed of the 3rd floor.

Question 18

Is £10,000 and appropriate marketing budget?

Answer 18

Yes I think it was proportionate.

With the available space we had initially it came to approximately £1 psf.

It also worked out as being approximately six days rent if we were able to achieve £57.50 psf overall.

Question 19

What was the cost of the breakfast launch?

Answer 19

The breakfast launch cost roughly £3000 which included the breakfast and also some on floor marketing material.

Question 20

Is a launch costing £3000 appropriate on a floor of the size?

Answer 20

Yes, I believe it was appropriate and proportionate.

It worked out as approximately £1 psf for the available space and equated to about 6 days rent which I deemed to be suitable.

Question 21

How did you assess the true rent of the comparables you used?

Answer 21

To assess the true rent of the compatibles I compiled, I calculated the net effective rents.

Question 22

How did you calculate the net effective rents?

Answer 22

To establish the net effective rent, I advertised the rent free incentives, less an allowance for a fit out period, over the term of the lease until the next lease event as well as to the end of the lease.

Question 23

What was the specification of the third floor?

Answer 23

Third floor was to a Grade B specification.

Question 24

What is Grade A office space?

Answer 24

Grade A office space as defined by the BCO includes:

Air-conditioning 
LG7 compliant lighting 
Raised floors with a void of 150 mm 
Suspended ceilings with a void of 350 mm Double glazing 
2.6m floor to ceiling heights

Question 25

Why is the third floor not defined as Great A specification?

Answer 25

Whilst the third floor was newly refurbished with air-conditioning, LG7 compliant lighting and had a floor to ceiling height of 2.6m, it did not have a number of components that it would need to be defined as Grade A office space such as double glazing, a raised floor and a suspended ceiling.

Question 26

What was the agreed timeframe for completion set out within the Heads of Terms?

Answer 26

It was agreed in the heads of terms that parties would aim to complete within 20 working days from receipt of the principal legal documentation.

Question 27

Can you briefly explain the timeframe of this instruction to me?

Answer 27

My company was instructed in 2015 prior to my arrival to dispose of a few floors within the building. We were able to dispose of the floors higher up the building relatively quickly however, the 3rd floor did not receive the same level of interest which required us to look at our marketing approach and reduce the quoting rent in early 2017. Once we had re-assessed the quoting rent and used some more marketing initiatives we were able to dispose of the third floor within a short timeframe.

Question 28

What is the definition of market rent?

Answer 28

Market rent is the estimated amount for which property should let on the valuation date between a willing lessor and a willing lessee, on appropriate lease terms, in an arm’s-length transaction and after proper marketing where both parties have acted knowledgeably prudently and without compulsion.

Question 29

What air-conditioning was in your building?

Answer 29

VRF/VRV