Editor’s note: This article was first published in October 2010, during Spain’s post-bubble property slump and the restructuring of banks and savings banks. Its comparisons with rents five years earlier and its forecasts of more empty premises refer to that moment.
When the property bubble burst, property sales ground to a halt, but there were still very good business opportunities in rentals, especially of commercial premises. Anyone who owned premises in a city centre was sitting on a gold mine.
Now, if we take a walk through the centre of any city, we’ll notice that the most central premises are, as a rule, in high demand among banks and savings banks. Also among well-established companies, franchises and offices that provide all kinds of services, such as accounting and tax advisory firms.
The rent on these central premises has always been high, so a small shop couldn’t afford to be on the front line of a busy city-centre street.
What’s happening now
As we all know, banks and savings banks are going through a phase of cost-cutting, mergers, acquisitions and so on. This shows up in branch closures and in the sale of their own premises, where they then stay on as tenants and negotiate the rent.
That’s the main problem: owners of commercial premises haven’t stopped to think that they need to renegotiate the price and accept that the situation has changed. They can no longer charge the same rent as five years ago, and that doesn’t mean everything will be back to normal in two years’ time.
For the first time, our most central streets have “for rent” signs that stay up for months and even years. This won’t improve in the short term; if anything, there will be more of them.
Medium-sized companies are moving to the outskirts of big cities to avoid current commercial rents, and as soon as the banks start closing more branches, owners of commercial premises will inevitably be forced to lower their prices if they don’t want their premises sitting empty and earning nothing.
A crisis is a snowball that keeps growing as it rolls, and the one who usually gets out of its way is the one who renegotiates in time. The perfect tenant for commercial premises is a bank, which can sign a lease for as long as 25 years. It’s a safe tenant that pays reliably, and right now it will try to negotiate the rent down.
So if you’re one of those people or investors who make a business out of renting commercial premises, remember that right now you need to be flexible, because supply exceeds demand.
Further reading
- Business idea: a virtual assistant company
- Business ideas in services for companies
- A positive mental attitude in the face of the crisis
- How to find business ideas
- How to attract your first customers
Featured image: onnola, CC BY-SA 2.0, via Flickr.
