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Joint venture projects in commercial property: An overview

With the UK’s commercial property market being daunting at the best of times, joint ventures (JVs) have emerged as a pivotal strategy for developers and investors.

Rising land, materials, and construction costs mean that pooling resources can allow for greater potential for all partners involved.

What is a Joint Venture in commercial property?

A joint venture is when two or more parties come together with the intention of undertaking a specific project or developing a commercial property.

All parties combine their resources – be it financial, expertise, or otherwise – to achieve a mutual benefit.

The structure of the JV can vary from formalised limited companies to more informal contractual co-operations.

Why should I opt for a Joint Venture?

  • Risk sharing: Commercial property development can be full of uncertainties. JVs allow all parties involved to distribute the associated risks, ensuring that no single entity bears the bulk of any potential setbacks.
  • Financial flexibility: Especially relevant for larger, capital-intensive projects, JVs enable partners to pool financial resources. This can offer more leeway in securing better loan terms or even bypassing certain financing needs altogether.
  • Diverse expertise: By partnering with people from different areas of the property sector (or even from other sectors), JVs can bring varied skills to the project. A developer with land might partner with a construction firm with the necessary equipment, for example.
  • Access to new markets: For firms looking to branch out into unfamiliar regions or niches within the UK, a JV with a local party can be invaluable, as they can provide instant insights into the market and may have an established network of contacts.

Things to keep in mind

Whilst an exciting premise, JVs in commercial property need to be well planned out so they don’t negatively affect the project.

A way to prevent this from happening is by having clear communication from the outset. Aligning objectives is also crucial, as differing goals or visions for the project can lead to conflicts.

There should also be a clearly defined exit strategy so that all partners have a clear understanding of how to conclude the JV, be it through selling the developed property, leasing it out, or some other means.

Finally, there should be thought given to the legal aspects of a JV in commercial property. Given that significant capital is at stake, setting the terms and conditions in legal agreements is essential. Legal complexities can also sometimes stall projects if not addressed promptly.

For legal advice on commercial property joint ventures, please get in touch today.

Carl Jones

Director - Head of Commercial Department

I qualified as a Solicitor having completed my training with Mander Hadley in 1992 and am a member of the Law Society Property Section and The Warwickshire Law Society.