Convergence – New Thinking By Corporate Occupiers?

You might be wondering what examining your i-Phone has got to do with your Corporate Real Estate portfolio and occupational demands, but it’s a perfect example of convergence of thought and the expectation changes that are driving one of the most profound changes in CRE philosophy.

Pick up your i-Phone, or indeed any other smart phone and just look at its capabilities compared to your old Nokia from the late 1990’s. The chances are you’ve ‘got an app for that’, whether its splitting a dinner bill, navigating your way around the West End, or checking the history of the interesting car you’ve just spotted on Autotrader; and that’s in addition to your ability to email, SMS and call. It’s a very different product to your old Nokia, one driven by demand and convergence of thought. Bringing everything together in one place makes sense doesn’t it? Perhaps this is the reason that we are now seeing large numbers of occupiers looking to consolidate their real estate but also allowing themselves to embrace changing practices in the workplace and facilitating more efficient property portfolios.

Commercial property requirements driven solely by cost are now largely a thing of the past. No longer are cost, operational efficiency, CSR and marketing mutually exclusive. These are all factors which can drive and influence a corporate property requirement and often overlap each other. Trilogie’s clients are now demanding and expecting that their property portfolios work harder for them..

A successful property portfolio should reflect the objectives and ambitions of the business and must match its operational requirements, but it should also be able to offer CSR opportunities by allowing occupiers to display their ‘Green Credentials’. This convergence of thought from occupiers is providing some interesting consolidation plays.

Two of the largest office market transactions in the South East over the past five years have been great examples of convergence of business needs. FLUOR’s 200,000 sq ft move from Camberley to SEGRO’s IQ Farnborough scheme where they could spec and influence the design of a campus of buildings appears to have been successfully achieved. Siemens consolidation from Bracknell to Development Securities 180,000 sq ft Frimley Square scheme was brought about by a wish to avoid the disruption to staff that would have ensued if they had refurbished and the need for better organised workspace. In a turbulent market the opportunities to consolidate, improve operational efficiency, lessen their CRC obligations and provide additional security at competitive terms were clearly drivers in both cases.

This convergence is being reflected in consultancies, with clients wanting a ‘one stop shop’ approach that gives them a more complete service from their property advisers.. Trilogie has in the past year expanded its own offering by adding Space Planning, Workplace and CRC consultancy to its services in response to occupiers’ demands. For consultants to act successfully on behalf of a corporate occupier they need to be able to provide and offer more than simply a property solution; that solution needs to encompass operational,, green and, accounting considerations. It’s my view that convergence is here to stay and that occupiers will continue to demand more from their portfolios, particularly as working practices continue to evolve thanks to improved IT and remote working.

An interesting addition to this was Drivers Jonas recent marriage with Deloitte, one can see the synergies, particularly in areas of corporate governance and finance. I suspect perhaps it’s the first of several such alliances amongst Business Advisors/Accountants and Property Consultants. In the US particularly, the forthcoming FRS13 obligations will capitalise rent liabilities onto balance sheets so there is going to be increased scrutiny of terms and liabilities from occupiers, which particularly in US parent or US based corporates may spread itself across ‘the pond’ and impact the EMEA markets as well.
It’s an interesting and exciting time and one which presents new and interesting opportunities for both property advisers and corporate occupiers alike. So if you’ve got a property portfolio that’s not working as efficiently as it could, then speak to Trilogie, “we’ve got an app for that”!

Tim Crighton
tc@trilogiecre.com
01628 811277

A good time for businesses to invest in new facilities?    At Trilogie we think so.
Procuring a new build manufacturing facility, distribution depot or office block in an uncertain economic climate might seem like a daunting task, but before you put the decision to one side, you should consider this:
* Building project costs have fallen significantly during the recession and now represent good value to those who are considering expansion or reorganisation.
* Civil engineering order books have shown a roughly 38% fall on an annual basis and growth in construction output is expected to be sluggish in 2010/11 if, as the cuts in Government capital spending begin to bite in 2011.
* Changes to the planning system are already emerging.  The Conservatives had, before the election, put forward a Green Paper called “Open Source Planning”, a radical change to the planning system which will inevitably take time to bed down. There is, therefore, a case for arguing that a significant application submitted now may avoid getting bogged down in changes to the planning system under the new Government.
* Land is relatively cheap compared to a few years ago, and strong deals can be driven with developers, contractors, Landlords and others keen for liquidity, turnover and mitigation of empty rates liabilities.
Whilst the UK economy as a whole may not experience recovery growth at the levels seen in the “noughties”, Trilogie CRE takes an optimistic view on the outlook for certain sectors of the economy over the next couple of years.  Many of our clients are operating in global markets and are already experiencing upturns in demand as some world markets, less affected by recession, have started to grow relatively strongly in the last few months.

Office for National Statistics figures published in August, indicate a relatively strong growth in exports – on a world basis, UK exports reached a two year high in May. Exporters are relying on continued demand from India and China, but there are fears that the US economy will slow in the last quarter of this year.
The latest forecast published by British Chamber of Commerce also strikes an upbeat note with a prediction that the UK economy will grow by 1.7% compared to its March forecast of 1.3%. But growth prospects are being tempered by an expected weakness in consumer demand as unemployment remains at relatively high levels and discretionary spending is squeezed.
Over the past two years there has been very little speculative development and consequently a shortage of good modern facilities is apparent.   Occupiers requiring new space will need to procure this by either working with a developer or, with the right advice, directly with the landowner.

We think the time is right to consider the options available if your company is looking to expand its facilities or rationalise by “right sizing” the business. Historically low construction costs and capacity in the civil engineering sector to undertake projects, we believe, provides a good opportunity for businesses to consider investing in new facilities. Trilogie CRE has wide experience of leading clients through complex developments from site search and acquisition, through design and specification to contract supervision. Additionally Trilogie has a proven track record in seeking funders for commercial development projects where their client will become the occupier. This model allows the business to take advantage of its own good covenant to leverage an advantageous lease from their landlord if they decide not to retain the freehold.

At Trilogie we recognise the business imperative to make the correct decisions on investment. We would welcome the opportunity to talk to you about any of your business plans where property is an important element. Visit our website www.trilogiecre.com to see the full range of services that we offer to corporate occupiers.
For more information:
Keith Martindale
Trilogie Corporate Real Estate
km@trilogiecre.com
T. 01628 811277
F. 01628 528109

Dilapidations Claims
An often overlooked liability in a tenant’s lease is the cost of dilapidations. Most leases will have a repairing obligations clause which will require the tenant to put the building back into an agreed state during the lease term or when the lease is terminated or expires. 
Claims by landlords against tenants often run into tens of thousands of pounds and tenants are sometimes shocked by the scale of a claim, particularly when they think they have left the building(s) in good condition, or where the building was in poor condition at the start of the lease. 
In the current climate, landlords are looking to recover as much as they can from tenants and a robust, carefully agreed defence is required if tenants are going to avoid excessive claims.  Budgets should be prepared well in advance of lease expiry. 
Trilogie CRE has an outstanding record of reducing tenants’ dilapidations liabilities, in some cases achieving savings of 50% or more in the amount claimed. 
Under FRS 12, accruals have to be made in the Accounts in respect of  onerous provisions associated with non-operational or surplus properties through an assessment of liabilities.  This is a task that Trilogie undertakes. 
If your lease is within 12 months of its expiry or termination, or you are otherwise concerned about your potential liabilities, talk to Trilogie – we will help you put together the best possible defence.
Contact Jeremy Firth  T.  01628 811277E. 

Adverse Possession A Cautionary Tale
An illustration of how easy it can be for the ownership of valuable investment property to be lost under the doctrine of adverse possession.
Most property owners will be aware of the legal doctrine of adverse possession or “squatters’ rights” but few will be aware of its potential scope. Adverse possession derives from the law of limitation.  If a land owner does not evict a trespasser within 12 years, the right to bring the claim is lost and accordingly the squatter can be rewarded for their dozen years of trespass with insuperable title from the land registry for free. Contrary to the common perception, adverse possession is not confined to the acts of those on the margins of society taking refuge in unoccupied and unwanted town houses. The doctrine can operate even on an unsuspecting owner in circumstances where the land owner and occupier are known to each other, and neither has any idea that a trespass has taken place. As some recent cases have shown, a full scrutiny of the basis upon which land is occupied may only be made after the 12 year limitation period has elapsed, prompted by a sudden and fantastic rise in the value of the land as a result of a change in its planning status. The fact that the land is registered to the owner is no protection from a claim for adverse possession by the squatter if the twelve years has accrued prior to registration.A right to occupy might very commonly be granted by licence or permission when a formal tenancy is not thought necessary. In such circumstances the occupation is permissive and is clearly not a trespass at that point, and so the twelve year clock can not start to run. But two notable cases to have reached the courts recently illustrate the disastrous unintended consequences that occur when the vigilance over the legal right to occupy lapses. In the first case a grazing licence was granted to a farmer for a particular parcel of land exclusively for a particular period of time. When it expired the farmer carried on in occupation. He wrote to the owner to ask for a further licence, but the owner failed to reply. The farmer kept on using the land for grazing, assuming that the owner did not mind. Relations between the farmer and owners had not been at all difficult or hostile. The owner was not getting much of a fee for the licence and did not think it was particularly important to renew the paperwork. Many years later the land falls within the development boundary of the expanding settlement and has a potential value of many millions of pounds. The farmer claims adverse possession and wins.In another example, a farmer is granted a licence (in writing) to farm a particular field until further notice by an agricultural company in the early 1970s. In the late 1970s the company transfers the ownership of the field to another company within a group under the same parent company. Nothing else changes.  No notice to terminate the licence is ever served. The farmer keeps the licence safe, knowing that it is an important document of legal significance, treating it like a birth certificate or passport. The farmer does not seek to assert ownership of the land, and when the owner negotiates with a road builder for a gravel extraction pit to be dug in the mid 1990s, the farmer makes no complaint. The owner receives significant royalties for the gravel from the road builder. In 2007, following a polite request from the owner for a meeting to discuss formalising the occupancy of the land, the farmer claimed that the land had in fact become his by adverse possession 12 years after the land was transferred in the intergroup transaction. The farmer’s acquiescence during the gravel pit extraction is explained simply on the basis that the farmer did not then know about the right to adverse possession. The farmer claims adverse possession and again wins.Surely these cases are outrageous you may say. How can this be adverse possession when no one would really see the farmers’ occupation as either adverse or a trespass? The answer becomes clear when the components of adverse possession are explored. There are really only two requirements a) exclusive factual possession and b) an intention to possess. The first, in the case of the occupying farmer, is not really in any doubt. The land is agricultural, no one else uses it and the cultivation of the land is very good evidence of possession. So far so good for the squatter, but what about the intention to possess? This is where the legal argument becomes very much more cloudy and inconsistent. In short, an intention to possess is not an intention to own, and so it is possible for a farmer in occupation to run out his 12 years successfully even if he has no awareness of the principle of adverse possession, and no intention ever to be the owner of the property. All he must do is intend to possess. That might mean as little as intending to occupy as an owner might, and worse still for the landowner, the intention is readily inferred from the action of possession. Once the 12 years are notched up, it is said to be held on statutory trust until such time as a claim for adverse possession in brought or until the possessor is himself dispossessed.But what about the licence agreements? In the first case, the licence expired by effluxion of time and in the second, the licence terminated automatically, upon the transfer of land. Not surprisingly neither the paper title owner nor the occupier appreciated this particular quirk of land law at the time.  A licence (unlike a lease) is a personal contract rather than an interest in land and so does not pass with the title. But surely a licence would be implied in circumstances such as these? Implying a licence is very difficult in adverse possession cases, not least because the Limitation Act, which gives us the 12 years limitation rule, expressly rules out the opportunity for a licence to be implied when it might seem reasonable to do so.In both cases the law would appear difficult to justify. The principle of adverse possession is sometimes defended on the grounds that it is necessary to ensure proper utilisation of land and that those who “go to sleep on their title” should not be permitted to keep it when someone else can make good use of it. Such arguments carry little force in cases such as this where the protagonists are known to each other or in an era of land registration, where the registered proprietor even if not known, is easily identifiable.Since October 2003 a change to the law (for registered land only) means that a would be possessor must now give the registered title owner a warning, before the critical 12 years is reached. It is almost impossible to imagine that the paper title owner will not then act very quickly to reclaim the land to defeat the adverse possession. But most significantly the Act is not retrospective and so will not affect claims where the 12 years has been notched up before October 2003. Also the Act does not apply to approximately half the land in the country that is unregistered. Given the significant protection that registration affords against adverse possession, land owners may be well advised to instruct their solicitors to seek voluntary registration of their land.Do you need to take any action?
Whilst the two examples given relate to agricultural land, the principle of adverse possession can apply to any land and in the case of a corporate owner, may be brownfield. We all should be aware of the potential for a claim.
If land owned by a corporate occupier is not registered, then you should consider registering your land.
Some land owners are not fully aware of whether parts of land in their ownership are occupied and if they are, the nature of that occupation. If land is occupied by a body other than the owner then the arrangement should be thoroughly investigated.
If the legal basis for occupation is deficient then the owner should formalise the arrangements either by an appropriate tenancy or licence as soon as possible.
For more information, please contact:- 
Richard Eaton Property Litigation Partner Birketts LLP 24-26 Museum Street Ipswich Suffolk IP1 1HZ 
DD 01473 406291 Email: richard-eaton@birketts.co.uk
OR
Richard Cooper Trilogie CRE Neptune House Mercury Park Wooburn Green Buckinghamshire HP10 0HH
DD 01628 811277 e mail rc@trilogiecre.com

A study published at the end of 2009 by the Engineering Employers’ Federation and BDO Stoy Hayward, reported that one in seven companies has repatriated at least some of their production to the UK in the last two years.  The main reasons for the change of heart were found to be higher than expected costs and problems in achieving expected levels of quality.

Most relocators have returned from China and Central and Eastern Europe, but currency shifts have also resulted in manufacturing returning from the U.S and Western Europe.

If your company is thinking about relocating back to the U.K, talk to us at Trilogie – we will help you find a suitable site for your production facility and procure and fit out the new building.

For more information:

Keith Martindale
Trilogie Corporate Real Estate
T. 01628 811277
F. 01628 528109
M. 07768 924924
E. km@trilogiecre.com