Exit strategies for business tenants

Many businesses in the UK occupy premises on fixed term leases, which usually run for several years. During this time property requirements can change. This research critically examines the three main mechanisms by which tenants can bring their leases to an end; breaks, assignment and subletting. We examine the legal rules governing these devices and undertake an analysis of lease data and surveys. Break clauses are providing a useful exit mechanism for many tenants, but they cannot give the more general flexibility of assignment and subletting. However, change is necessary to ensure that these latter provisions provide real flexibility for tenants.

Small business lease reform - can the UK learn from the Australian experience?

This paper addresses the commercial leases policy issue of how to deal with small business tenants. The UK has adopted a voluntary solution to commercial lease reform by using Codes of Practice which is in contrast to the legislative approach adopted by Australia to attempt to solve its perceived problems with small business retail tenancies. The aim of the research was to examine the perceptions of the effectiveness of the legislation in Australia and discuss any implications for the UK policy debate. The research used a combination of literature and legislation review and a semi structured interview survey to investigate the policy aims and objectives of Australian Federal and State Governments, identify the nature and scope of the Australian legislation and examine perceptions of effectiveness of the legislation in informing small business tenants. The situation is complicated in Australia due to leases being a State rather than Federal responsibility therefore the main fieldwork was carried out in one case study State, Victoria. The paper concludes that some aspects of the Australian system can inform the UK policy debate including mandatory information provision at the commencement of negotiations and the use of lease registrars/commissioners. However, there are a number of issues that the Australian legislation does not appear to have successfully addressed including the difficulties of legislating across partial segments of the commercial property market and the collection of data for enforcement purposes.

Small business legislation in Australia: does it provide a solution to part of the UK lease reform debate?

This paper addresses the commercial leases policy issue of how to deal with small business tenants. The UK has adopted a voluntary solution to commercial lease reform by using Codes of Practice which is in contrast to the legislative approach adopted by Australia to attempt to solve its perceived problems with small business retail tenancies. The major aim of the research was to examine the perceptions of the effectiveness of the legislation in Australia and discuss any implications for the UK policy debate but the results of the research also raise questions for the Australian regime. The research used a combination of literature and legislation review and a semi structured interview survey to investigate the policy aims and objectives of Australian Federal and State Governments, identify the nature and scope of the Australian legislation and examine perceptions of effectiveness of the legislation in informing small business tenants. The situation is complicated in Australia due to leases being a State rather than Federal responsibility therefore the main fieldwork was carried out in one case study State, Victoria. The paper concludes that some aspects of the Australian system can inform the UK policy debate including mandatory information provision at the commencement of negotiations and the use of lease registrars/commissioners. However, there are a number of issues that the Australian legislation does not appear to have successfully addressed including the difficulties of legislating across partial segments of the commercial property market and the collection of data for enforcement purposes.

Information sources and advice used by small business tenants when leasing commercial property

Many small businesses lease commercial premises. The terms of a lease can affect the ability of the business to grow and adapt and have an impact on cashflow. Ensuring that they have the information with which to negotiate terms is part of the UK government policy focus on small businesses. Such information is most effectively disseminated through the sources of advice that small businesses use during the leasing process. Therefore these sources of advice need identifying. An interview survey of small business tenants who have recently taken leases provides initial results that suggest small businesses do not seek out advice during the leasing process or see the need to be better informed. The only formal professional input is from solicitors but this is not until after the main commercial terms have been agreed. The landlords’ letting agents play a key, but ambiguous, role in providing information as well as advice. These results suggest that the most effective way of disseminating information by government could be via the letting agents, the very people with whom the tenants are negotiating.

The impact of country risk on international real estate returns

Commercial real estate investors have well-established methods to assess the risks of a property investment in their home country. However, when the investment decision is overseas another dimension of uncertainty overlays the analysis. This additional dimension, typically called country risk, encompasses the uncertainty of achieving expected financial results solely due to factors relating to the investment’s location in another country. However, very little has been done to examine the effects of country risk on international real estate returns, even though in international investment decisions considerations of country risk dominate asset investment decisions. This study extends the literature on international real estate diversification by empirically estimating the impact of country risk, as measured by Euromoney, on the direct real estate returns of 15 countries over the period 1998-2004, using a pooled regression analysis approach. The results suggest that country risk data may help investor’s in their international real estate decisions since the country risk data shows a significant and consistent impact on real estate return performance.

Do small business tenants need protecting in commercial lease negotiations?

This paper sets out the findings relating to small business tenants of a major UK Government funded study into the commercial and industrial property landlord and tenant relationship. The UK Government is concerned that small business tenants do not appreciate many of the implications of signing leases, which in the UK are generally longer than in most other countries of the world. The objectives of the paper are to identify the characteristics of leases in the UK and any differences between those signed by small, medium and larger companies. It also examines the negotiation process and identifies whether small business tenant negotiations exhibit different characteristics. The findings are that small business tenants occupy on different terms to larger tenants including shorter terms and that the negotiation process is also different. Many small business tenants are unrepresented at the commercial stage of negotiations and take the first terms on offer. They are largely unaware of attempts to make them more informed by voluntary industry Codes of Practice. This can lead to small business tenants being unaware of the implications of certain terms within leases, hence the continuing Government concern over the issue.

Country, sector and regional factors in European property returns

For those portfolio managers who follow a top-down approach to fund management when they are trying to develop a pan-European investment strategy they need to know which are the most important factors affecting property returns, so as to concentrate their management and research efforts accordingly. In order to examine this issue this paper examines the relative importance of country, sector and regional effects in determining property returns across Europe using the largest database of individual property returns currently available. Using annual data over the period 1996 to 2002 for a sample of over 25,000 properties the results show that the country-specific effects dominate sector-specific factors, which in turn dominate the regional-specific factors. This is true even for different sub-sets of countries and sectors. In other words, real estate returns are mainly determined by local (country specific) conditions and are only mildly affected by general European factors. Thus, for those institutional investors contemplating investment into Europe the first level of analysis must be an examination of the individual countries, followed by the prospects of the property sectors within the country and then an assessment of the differences in expected performance between the main city and the rest of the country.

Fifty years of international business theory and beyond

As the field of international business has matured, there have been shifts in the core unit of analysis. First, there was analysis at country level, using national statistics on trade and foreign direct investment (FDI). Next, the focus shifted to the multinational enterprise (MNE) and the parent’s firm specific advantages (FSAs). Eventually the MNE was analysed as a network and the subsidiary became a unit of analysis. We untangle the last fifty years of international business theory using a classification by these three units of analysis. This is the country-specific advantage (CSA) and firm-specific advantage (FSA) matrix. Will this integrative framework continue to be useful in the future? We demonstrate that this is likely as the CSA/FSA matrix permits integration of potentially useful alternative units of analysis, including the broad region of the triad. Looking forward, we develop a new framework, visualized in two matrices, to show how distance really matters and how FSAs function in international business. Key to this are the concepts of compounded distance and resource recombination barriers facing MNEs when operating across national borders.

Local agenda 21 and planning practice: structural transformation or window dressing?

Local Agenda 21 seeks the meaningful involvement of a wide range of local groups and stakeholders in the formulation and implementation of public policy and a free flow of communication and discussion between them and their respective local authorities (and other areas and levels of decision-making). This paper explores the reality of this process using case study evidence from local planning practice in Liverpool (in the north of England) and Reading (in the south of the country). It concentrates on the interaction between LA21 groups and local planning authorities around the preparation of local land use plans and other policy initiatives and the day-to-day regulation of development permits. The paper builds on ‘New Institutionalist’ theory to explore the constraints and opportunities for significant transformations in social, political and economic ‘structures’ or ‘ways of doing things’ through the LA21 process. It concludes that the two cases provide evidence of mixed success in achieving such changes in established planning practices.

The economic theory of international business: a supply chain perspective

This paper proposes a way of addressing unresolved issues in international business theory by modelling the multinational enterprise as a coordinator of supply chains. It identifies a new market seeking strategy that is an alternative to conventional strategies such as exporting, licensing and FDI, and analyses the conditions under which it will be adopted by firms. The new strategy involves the off-shoring of production and the out-sourcing of R&D, and is implemented through co-operation between a source country firm and a host country firm.

Business parks and town centre workplaces in England: a comparative analysis of commuting-related energy consumption

To fully appreciate the environmental impact of a workplace the transport-related carbon dioxide (CO2) emissions resulting from its location should be considered in addition to the emissions that result from the occupation of the building itself. Since the first one was built in the early 1980s, business parks have become a significant workplace location for service-sector workers; a sector of the economy that grew rapidly at that time as the UK manufacturing output declined and the employment base shifted to retail services and de-regulated financial services. This paper examines the transport-related CO2 emissions associated with these workplace locations in comparison to town and city centre locations. Using 2001 Census Special Workplace Statistics which record people’s residence, usual workplace and mode of transport between them, distance travelled and mode of travel were calculated for a sample of city centre and out-of-town office locations. The results reveal the extent of the difference between transport-related CO2 emitted by commuters to out-of-town and city centre locations. The implications that these findings have for monitoring the environmental performance of workplaces are discussed.