Leases 4.2.9 However, it is not only costs but also flexibility over leases that impact upon SMEs business viability. There is an inherent tension between occupiers and landlords. 4.2.10 SME’s by their nature require short-term flexible occupation arrangements. These companies tend to have unproven financial track records and are often in a state of flux regarding the amount and type of accommodation required. Traditional leases with medium to long term commitments are therefore far from ideal. SME’s therefore prefer to occupy space on shortterm business contracts for renting desk space, through to licences for semi private business rooms and easy in easy out tenancy arrangements. From an owner’s perspective, this space let on such arrangements traditionally commands a premium over Internal Repairing (IR)4 leases to reflect the greater risk to the landlord on surety of income and the higher management costs in the operating of shorter term leasing arrangements. 4.2.11 The market for such space is well developed in the UK . It includes international operators such as Regus through to independent trusts and other high net worth companies. Hands on management of such facilities is perhaps the key to success focussing on the need to be flexible to occupier requirements, dealing with short term vacancy issues and ensuring that management and maintenance of the services is provided to a high level. 4.2.12 LTES service providers often target vacant, underused and secondary commercial stock where the potential for attracting a single occupier on a long-term lease is limited. LTES providers can tap into the SME market by subdividing existing accommodation and providing the flexible occupancy arrangements SME’s require. New build LTES space is much more difficult to deliver and often requires large amounts of accommodation to generate the economies of scale required to make the provision of support services viable.
Approaches to intervention 4.2.13 The economic success of London’s various local centres and high streets will be reliant on different factors in different locations. This makes creating an all-encompassing policy response to the challenges being faced by high streets difficult to achieve. However, providing boroughs and local stakeholders with the tools they require to respond to the differing circumstances of their local town centres will bring about positive outcomes for the capital.5 4.2.14 The London SME reports conclusions of public intervention for SMEs directly applies to the case for intervention in LTES. There is weak evidence for a case for general public intervention. There may however be a case for selective and targeted intervention for LTES space occupied by new and start-up businesses; LTES space in regeneration areas and some LTES space in town centres that is assessed to fundamentally need to be located in the town centre. This is discussed in more detail below.
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The tenant pays for all repairs apart from structure. which is the responsibility of the landlord London Councils, Streets Ahead? Putting high streets at the heart of local economic growth
69 | Accommodating Growth in Town Centres