12 July 2002

SHORTLIST

OF KEY DOS

AND DONTS

Having been involved in

farm building conversions

totalling 200,000sq ft

over the last few years,

Julian Sayers reckons he

has a pretty good idea

of what works and what

doesnt. Heres what

he advises other farmers

thinking of venturing down

the conversion route

&#42 Starting off

&#8226 Location is critical. Access to a main road is important. The people occupying your offices or workshops wont want to drive too far down single-track roads to get to work. On the other hand they will like it if they can get to the village shop or pub (or a supermarket) and back within their lunch hour.

&#8226 You will only succeed by offering a premium quality product. Dont even think of trying to offer a cheap-and-cheerful solution; traditional buildings are expensive to convert and you are not aiming to undercut offices in the local town.

&#42 Design features

&#8226 Tenants want to see the character and architectural features, like beams and the open structure, retained.

&#8226 Make it as easy as possible to join two or more units together to make a larger one should tenants want to expand. Its cheaper to build in a doorway at the outset, plasterboard over it and then open it up again than have to hack out a new one at a later date.

&#8226 Install plumbing for a kitchen area in each unit, even if you dont need them at the time.

&#42 Marketing

&#8226 If you are lucky enough to have land alongside a major trunk road, a board advertising the offices will be seen by thousands of drivers. Keep it simple. Just say something along the lines: Offices to Let, 5000sq ft and the agents phone number.

&#8226 Dont underestimate the time it will all take. Allow 6-12 months for planning, two months for detailed drawings and specifications, a month for tendering and selecting the builder and 6-9 months actual building. It could be two years from start to finish.

&#42 Costs

&#8226 If you havent got much capital to speak of and dont want to take on a substantial loan, consider storage or workshop use. Typical rents of £2-5/sq ft and £5-10/sq ft respectively may be less than the £15/sq ft plus youd hope to get for offices. But remember the building costs will be much lower too, typically £5-25/sq ft for storage and £20-50/sq ft for workshops/light industrial, compared to £70-120/sq ft for offices.

&#8226 Workshop/storage use will probably only be feasible if the buildings dont need too much work done to them. If youre having to reroof, with extensive timber repairs and other works such as pointing, only the relatively high rents from office use will pay back the costs in a reasonable time-frame.

&#42 Managing the project

&#8226 If the architect you choose hasnt dealt with rural business conversion before, make sure their plans are seen by someone who has the right experience.

&#8226 The architects final drawings must be very detailed and every aspect of the build specified and costed. Unspecified areas will mean the builders will have to ad-lib, usually adding extra cost further down the line.

&#8226 You must operate on a fixed-price basis. Ideally you would get 4-5 local builders to tender on price and completion time.

&#8226 Unforeseen extras (politely called variations in the trade) must be avoided if at all possible. Dig trial holes around the building to check the foundations. If existing walls are plastered or rendered, hack off some of it to check the construction of the wall underneath. Check everywhere for damp. Get up into the roof and check the roof timbers closely. You may not like what you discover but at least you can then put a realistic cost on these extra works rather than relying on the builder to come up with his price.

&#8226 Arrange for regular once-a-month site meetings to check that the work is on schedule, up to standard and hasnt turned up any variations. However well you have examined the buildings beforehand, unforeseen problems will come up and involve extra cost. At least if you know about them beforehand, you have a chance to make some economies elsewhere.

&#8226 Resist the temptation to give on-the-spot instructions to the builders to do something major that wasnt in the plans. All changes of any substance must go through the supervising architect or surveyor and be costed before the builder starts to implement them.

&#8226 Penalty clauses must be built into the contract from the outset. Make them realistic rather than punitive, though, says Mr Sayers. He suggests that if the building work overruns the specified completion date – even by one day – the builder must pay you what you are foregoing in lost rent. So if its a 5000sq ft project at a rent of £15/sq ft, you would be losing £1442/week by delaying the arrival of the tenants. Charge that straight back to the builders.

&#42 Dealing with tenants

&#8226 Having tenants secured before you finish the building work is a huge advantage. They can come on board at any stage of the build and Mr Sayers reckons this has been achieved in 85% of the projects he has been involved with. The aim is to get them to sign an agreement to enter a lease 1-2 months before the buildings are ready. This equates to the exchange of contracts stage when buying a house; it is a binding contract specifying that if the buildings are ready the tenants are legally obliged to sign the lease.

&#8226 What if the building has been finished and you havent any tenants? Dont panic, says Mr Sayers. He reckons in most cases tenants are found within three months, though he does admit that he only takes on projects where theres a good chance of success in the first place.

&#8226 Timing. The commercial rental market goes dead in November and December and again in August. Ideally, start the work in spring and aim to have the groundwork finished by October. Marketing needs to be done between mid-January and the beginning of July or from early September to the beginning of November.