Trends in Commercial Leases

commercial leases


The commercial real estate sector has experienced significant changes brought about by the COVID-19 pandemic.  As businesses adapted to remote work and fluctuating economic conditions, the landscape of commercial leases in the UK has undergone a transformation.

The pandemic has reinforced the importance of flexibility in commercial leases. With the uncertainty of the business environment, tenants and landlords have become more open to flexible lease terms. We have seen less of traditional long-term leases giving way to more adaptable arrangements.  We see more short-term leases with flexible break clauses which allow tenants to adapt to changes in the economy.

Many tenants are seeking to renegotiate lease terms and seeking concessions which has led to landlords also adapting to maintain long-term relationships in place of vacant premises.

More recently it has been reported by the BBC that demand for office space in the City of London continues to rise and that planning applications are up by 25% compared to last year. An interesting trend is also reported that whilst some office workers are only coming into the office 3 or 4 days per week, this has been partly offset by a 5% increase in the workforce.

Statista is reporting a steady increase in commercial property values in the UK however, it points to some underlying trends that are not necessarily identifiable in headline numbers. For example, the rapid move to e-commerce has seen a rise in demand for logistics and fulfilment centres, whilst the move to more flexible office working has seen demand rise for smaller office spaces and the growth of co-working spaces. Set against this WeWork, who were tipped to be the future of office working at one stage, appears to be facing serious challenges with its share price falling by 40% in a day.

Hertfordshire, Bedfordshire and Buckinghamshire Commercial Property

Making sense of these trends and the implications for regional businesses is difficult given some sectors are over supplied, others are in great demand and local conditions can determine availability.

One thing that does seem to have changed is that in some sectors tenants can now negotiate more flexible terms relating to break clauses, and possibly rent free periods. The viability of negotiating options needs to be based on solid local experience.

This is where Pictons can offer clients substantial benefit in having an infrastructure of offices across the region, each of which has strong local commercial property links. As such if you are considering buying a commercial property, letting one or securing a lease on one, please contact a member of our commercial property team.

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