Landlords face rising costs from vacant commercial properties

Landlords face rising costs from vacant commercial properties

A recent survey reveals UK commercial landlords are losing nearly £50,000 annually on average due to issues linked to vacant units, including security incidents, deterioration and increased insurance costs.

A survey of 350 commercial property owners across the UK has highlighted the significant financial impact of keeping commercial units vacant. Landlords reported an average annual loss of £49,268 from a combination of theft, vandalism, building deterioration, water damage and other property-related problems.

The findings underline the growing challenges faced by landlords in managing vacant commercial premises, with nearly all respondents experiencing increased insurance premiums or tighter insurance conditions as a direct result of vacancy risks.

Survey details reveal extent of financial burden

According to the survey commissioned by SafeSite Facilities, 45% of landlords incurred costs between £25,001 and £50,000 over the past year due to incidents at vacant properties. A further 27% reported losses ranging from £50,001 to £100,000. These figures reflect not only immediate risks such as theft and trespassing but also longer-term issues like building deterioration and pest infestations.

Paul Goossens, operations director at SafeSite Facilities, emphasised the cumulative nature of these costs. He noted that while landlords often focus on visible risks like vandalism, the more substantial expenses arise from ongoing maintenance needs and insurance implications linked to prolonged vacancy periods.

Specifically, 22% of landlords identified building deterioration as their biggest challenge, followed by 11% citing water damage and 9% pointing to trespassing. The survey also found that 59% of landlords had seen insurance premiums rise due to vacancy-related risks, while 47% experienced insurers tightening the conditions of their coverage.

Context of rising commercial property risks

The commercial property sector has been grappling with higher vacancy rates amid economic uncertainties and shifts in business practices, including remote working trends reducing demand for office space. This has led to more units remaining empty for extended periods, increasing landlords’ exposure to risks and costs.

Unlike residential properties, vacant commercial units often lack the regular occupancy that can deter criminal activity and allow for early detection of maintenance issues. This absence of oversight accelerates deterioration and can lead to costly repairs and insurance claims.

Additionally, insurance providers are increasingly wary of vacant commercial properties, reflecting the heightened risk profile. This has resulted in higher premiums and stricter policy conditions, further adding to landlords’ financial burdens.

Practical implications for landlords and agents

For landlords with small or medium-sized commercial portfolios, the survey’s findings highlight the need for proactive management of vacant units. Regular inspections and robust security measures such as alarms, CCTV and controlled access can help mitigate risks.

Preventative maintenance is also critical to avoid accelerated deterioration and water damage, which are among the costliest issues reported. Landlords should consider scheduled upkeep even during vacancy periods to preserve property condition and reduce insurance claims.

Letting agents managing commercial properties should advise clients on the importance of vacancy risk management and encourage investment in protective measures. They can also assist in sourcing appropriate insurance policies that account for vacancy risks and negotiate terms to limit premium increases.

Uncertainties and areas to monitor

While the survey provides a snapshot of current costs, the evolving commercial property market means risks and expenses could fluctuate. Changes in economic conditions, insurance market responses, and government policies affecting commercial property use may alter vacancy rates and associated costs.

Landlords should stay informed about regulatory developments, particularly those related to commercial property standards, safety obligations and insurance requirements. The potential introduction of new licensing or compliance rules for commercial landlords could also impact operational costs and risk management strategies.

Insurance market conditions remain uncertain, with premiums and coverage terms subject to change based on claims trends and broader market factors. Landlords should regularly review their insurance arrangements and seek expert advice to ensure adequate protection without excessive cost.

Considerations for landlords managing vacant commercial units

• Implement regular property inspections to detect issues early and document property condition.
• Invest in security measures tailored to vacant commercial premises, including alarms and CCTV.
• Schedule preventative maintenance to minimise deterioration and water damage risks.
• Engage with insurers proactively to understand vacancy-related policy conditions and negotiate terms.
• Monitor local and national regulatory changes affecting commercial property management.
• Work closely with letting agents to ensure vacancy risks are managed effectively and market opportunities maximised.

Supporting landlords with vacancy risk management

TLA membership offers landlords and letting agents access to practical compliance resources and guidance relevant to managing commercial properties, including vacant units. Members can benefit from up-to-date information on property standards, safety obligations and insurance considerations.

Additionally, TLA’s new property management and compliance platform, ORBIT, currently in BETA testing, aims to support landlords in organising property records, scheduling inspections and maintenance, and maintaining documentation related to security and compliance. This tool can help landlords keep track of vacancy risks and demonstrate proactive management to insurers and regulators.

Exploring TLA membership and ORBIT BETA access can provide landlords with structured support to reduce the financial impact of vacant commercial properties and maintain portfolio performance.

Looking ahead, landlords should prioritise vacancy risk management as part of their overall property strategy to mitigate escalating costs and adapt to changing market conditions.

Sources: Landlord Today