Looking to lease lab space? Here are six ways you can improve your chances of success

With the weakening of the pound (particularly since Brexit) there has been a rise in overseas investment in life sciences businesses based in the UK. Whilst record levels of investment in the industry is welcome news, many businesses have been unable to fully capitalise on the investment in the industry due to a shortage of lab space. Although the shortage is a UK wide phenomenon, it is significantly worse in Oxford, Cambridge and London, where demand for lab space far exceeds supply.   

So, what can you do to gain a foothold in such a competitive property market? Our commercial property solicitors outline some practical steps you can take to give you the best chance of success. The following are key areas to consider and we will touch on these in more detail below:

• Business Plan
• Physical Requirements
• Business Requirements
• Budget
• Attitude to Risk
• Heads of Terms

Develop a business plan

It almost goes without saying that the businesses that we support do much better with a solid business plan. With this you will now what your budget, physical and business requirements are and you will have considered your business’ attitude towards risk. All of these things will help put you ahead of the competition when it comes to procuring much sought after lab space.

Determine your physical requirements

It is highly unlikely that the property you have identified will meet all of your requirements. We often find that tenants will need to convert or renovate a property before it is fit for purpose.

Many businesses operating in life sciences industry have bespoke requirements that need to be met before a property can be seen as one that is suitable for commercial use. Does the property have suitable ventilation in place? Do you need a floor that is capable of bearing the weight of heavy equipment? Is the location secure? Does it have a clean room or is there space for one? These are just a few points you need to consider if you are looking for a suitable premises.

Once you have identified features that are non-negotiable, you will be able to rule out any unsuitable properties and more importantly, act decisively when you do find a property that does meet your requirements.

Identify your business requirements

Are you likely to expand and require more space? Are you likely to share space with collaborators? Do your funders have specific requirements – length of term/security of tenure/change of control provisions? Taking on a lease is much more than the immediate physical requirements, you need to make sure that it fits the needs of your business in every sense.

Calculate your budget

It is important that you have a clear idea what you are willing to pay for lab space from the outset. The budget you have will go some way in determining the type of premises you will be able to obtain, as well as the location of the property.

Your budget should include the fit-out costs (including specialist machinery and equipment), lease payments (rent/insurance and service charge), operating expenses and legal expenses that you expect to incur when you lease the property, together with statutory payments such as Stamp Duty Land Tax (SDLT) and Land Registry fees.

Knowing your budget will help you narrow down your search for a property and will ultimately help you act quickly when you find a suitable property within budget.

Determine your attitude to risk

Some businesses are happy to enter into a lease with limited due diligence. Others require a full review, searches, title investigations, enquiries and more. Determining your attitude to risk will impact how quickly you can move when that much awaited opportunity comes along.

Heads of Terms

Although it may seem counter intuitive, having legal representation from the outset can help speed up negotiations with a landlord. We often find that tenants inadvertently prolong the negotiation process when the attempt to negotiate an agreement themselves without seeking legal advice. In such a competitive property market, it is important that you are adaptable and quick to take advantage of any opportunities as and when they arise.

For example, if the terms contained within a lease agreement are misunderstood or poorly drafted there’s a chance a deal breaking issue could creep into your lease agreement and cause one of the parties to attempt to renegotiate at the last minute or in a worst-case scenario, for the deal to simply fall through.

A property lawyer can help you help you understand your commitments by highlighting any provisions that they think are unclear, unacceptable, or otherwise require attention. They will be able to help you quickly review the heads of terms or lease agreement, ensuring your negotiations run smoothly.