UK commercial property leases are getting significantly shorter according to a new report from the British Property Federation and Investment Property Databank (IPD). The survey of 10,000 leasing agreements for commercial, industrial and retail properties showed that average lease lengths fell from 6.2 years to 4.8 years between 2007 and 2011.
This is a trend that will continue for some time, especially for smaller businesses, with over three quarters (78 per cent) of leases to SMEs in 2011 under five years in length and an average lease length of just 4.1 years. The reasons are not hard to find. Occupier demand continues to be weak and for those firms looking for properties it is important to maintain flexible and more short-term arrangements, with landlords keen to oblige them to meet their own liabilities. It is also a sign that occupiers want to plan for change. This means not only working on shorter and more flexible property leases, but also building flexibility into their organisation through the design and management of their workplaces.