Assisted by Maja Podinic.
As we draw closer to the construction of Sydney’s second airport, Coleman Greig has continued to pay close attention to what will eventually become of the 11,200 hectares known as the Badgerys Creek Aerotropolis. One point obvious at present is that this upcoming residential and business hub is set to change the face of retail leasing within the Western Sydney region.
The Greater Sydney Commission has expressed their desire to introduce UK ‘primes’ as foundational tenants in the commercial region, in the hope that this will bolster the area’s attractiveness to retailers.
With Geoff Roberts, deputy at the Greater Sydney Commission, noting that the first stages of development will be set for completion in 2022-23, there is no doubt that terms of leases may be overlooked in the rush to land a spot in the Aerotropolis. If you are looking to become (or currently are) either a franchisee or franchisor, it is important to bear in mind that your position is especially vulnerable, given that you must consider whether your business model terms will compete against the landlord’s lease terms.
If you want to make the most of your lease and avoid any potentially hazardous situations, below are a few factors to take into account.
Consider your stock
If you are required to receive stock (either large or small shipments), you should check what the lease terms and conditions say about doing so. If the terms don’t stipulate that you will have access to a loading dock, you may be required to receive deliveries via the common areas of the centre.
There are two problems with this:
- Your lease may stipulate that you must not interfere with common areas; and
- You may not have access to the premises outside the centre’s trading hours.
This is where taking the initiative to negotiate for your most ideal outcome comes into play. You will need to be prepared for the fact that the landlord may want to charge you for such access, or similarly, that they may consider your moving stock as unreasonably interfering with the quiet enjoyment of other tenants or customers within the centre.
As such, it is important to always ask the question: ‘Do the available access points work for my business?’.
Consider your trading hours
Depending on what your product is, and especially if you are in the food industry, it is relevant to consider the impact that missing out on foot-traffic coming from potential customers either departing evening, or arriving for early morning flights might have on your business. This may occur if your landlord decides to restrict your trading hours.
The ideal scenario for a business is to secure a lease which stipulates that the business has the right to occupy and trade outside the normal core trading hours (retail leases will have a clause that tenants can only trade within core trading hours). If the landlord agrees to allow your business to operate outside these trading hours, it will, unfortunately, often come at an extra cost. This subsequently becomes a matter of number balancing and working out whether your profits exceed your outgoings. I would strongly advise you to consider these factors in detail prior to the finalisation of your lease.
Consider whether you will be a disturbance
No tenant likes to think about the fact that they might be a disturbance to others, but it is vital to take this into consideration, as you don’t want to be subject to a complaint by your neighbours. It’s often things that don’t immediately cross our minds – for example, if your business is a 24-hour gym and is creating noise due to the music, machines or group classes, you could be in breach of your lease. To avoid this, you need to negotiate out of liability for any disturbances emanating from your premises.
Consider where you want your signage to be seen
This is a clause that can often be overlooked in the rush to finalise a lease and get access to the premises as soon as possible. Be wary that your lease will generally include a clause stipulating that the tenant can install signage on the premises with the consent of the landlord and relevant authorities which will not be unreasonably withheld.
If you have specific signage requirements (e.g. if you want to advertise within car parks or escalator walls), the standard leasing clause may not allow you to do so – so it is relevant to check whether this has been specified within your lease.
Competing uses
It is vital to consider what other tenants are doing within the building that you are occupying. In most cases, the landlord will not grant exclusivity for your use – so you will need to ask the question ‘is this likely to impact on my business model?’.
Fit out costs
As with the range of other expenses, you will need to budget for your fit-out costs. I sometimes find that my clients overlook the hidden costs associated with the opening of a business location – ones which fall under what are often referred to as ‘category one’ costs. One common example of hidden costs is the need to modify services such as power supply, ventilation, drainage points etc. It is important to understand who will be liable for these types of costs, as these types of changes to the building may incur significant costs.
What if you are not a franchisee?
The Aerotropolis is envisaged to include commercial, agricultural, industrial and residential development – if your business falls within the first two groups, it is important to have a thorough understanding of what your permitted use is.
Landlords like specific permitted use descriptions, as they allow them the flexibility to grant leases to other tenants where they might have non-competing or exclusivity provisions in their leases. Similarly, tenants like to have specific permitted use description to ensure that there is no doubt as to what they can and cannot do in their premises. With this in mind, tenants need to remember that the more specific your permitted use description is, the harder it is to introduce new product lines – and in this competitive market, this may not be something you want to forego.
Whilst you may be excited by the prospect of leasing a space in this booming Western Sydney region, it needs to be emphasised that rushing into a lease will not do you any good. You will often be agreeing to hidden nasties that could have been avoided, or at least minimised if you had engaged in effective negotiations with the landlord.
There are always a wide range of issues to consider when negotiating a retail or commercial lease. If you are thinking about leasing a space here in Western Sydney, whether as a part of the incoming Badgerys Creek Aerotropolis or otherwise – it is always a good idea to speak with an experienced property lawyer before making any major decisions.
If you have a query relating to any of the information in this article, or you would like to speak with a lawyer in Coleman Greig’s Commercial Property team, please don’t hesitate to get in touch today:
