If you won a commercial property investment in a raffle and these were its investment credentials then it wouldn’t seem much of a prize. Yet, a few years ago a client (apologetically) asked if we’d look at something in Nottingham which boasted these very credentials. This is the story of the Nottingham Wholesale Fruit & Veg market which, in 2013, had turned into a very bad apple indeed.

The site

This site was created to house a fruit and veg market relocation from the city center. It was only 35,000 sq.ft. and the construction was modern, so not the traditional Victorian imagine you may have of a traditional fruit and veg market. The units were ‘drive through’ and it was secure. The issue was cost, specifically the service charge.

The estate was set up specifically for wholesale food use and the presumption from the outset was that anyone letting a unit here would do the same thing; but this wasn’t the case. Demand from the fruit & veg sector was very low indeed and the running costs of such a bespoke facility were disproportionate to the rest of the industrial market. Plus it was a relatively small facility so the ‘maths’ of the service charge worked against it.

In 2013, the service charge here was an eye watering £7.50 sq.ft….on what was essentially an industrial estate. The factors driving this were manned 24/7 security, daily clean-up costs and electricity. These are tenants that come in the night, such is the nature of the industry. If you turned up at 9am in the morning, the units were locked up as they’d finished their shifts; but the lights were on all night, every night. And they weren’t LED’s! It cost a fortune.

Angry tenants

The tenants needed the services but didn’t want to pay the current rates for them and the letting agents simply couldn’t let the void units without significant service charge caps.

The tenants were also cross. Very cross. Angry tenants are usually associated with arrears as they think this is the only way they can be heard. They couldn’t understand why things couldn’t change and despite the client appointing one of the biggest property managers in the world to manage the estate, everyone was at loggerheads… so they came to us.

Hands-on tenant audit

What followed was a hands-on tenant audit and a critical review of the service charge. It was abundantly clear that tenants would renew leases and maybe take more space but only if the costs of occupation were brought under control. The solution was to upgrade and automate the key elements of the service charge which our client was prepared to fund. We moved to deliver:

• Automated security
• Upgraded cardboard recycling (a revenue stream to the service charge)
• Upgrade to the external lighting
• Introduction of a 2-tier service charge model

2 years later

2 years after our appointment, our client sold the investment substantially ahead of valuation and the investment credentials were:

• The void rate fell to 19%
• Net income rose by 205%
• The service charge fell to £2.50 sq.ft for wholesale operators and 56p for everyone else.
• The AWULT increased to 4.53 years

Wedded to ‘process’ 

Here in Nottingham too many people in the management process were wedded to ‘process’ and not able to think about how costs could be reduced. They were frightened of capital expenditure and weren’t able to make a business case for change. This estate needed client level input ‘on the ground’ and a time involvement the client couldn’t make.

This was a time-consuming instruction but yet a rewarding one because everyone got what they wanted from it and we were very pleased when the tenants were not very angry at their landlord and the client was able to sell, and move on.

If you have instructions or assets with similar characteristics and want a solution, please get in touch.