More Bargaining Power for Commercial Tenants

It’s A Good Time for Tenants to Take Advantage

In a report due to be published next week by the British Property federation and the Institute of Property Developers, findings show that lease lengths in the UK commercial property market have fallen to an average of 4.8 years, a decline of over a year compared to those before the recession in 2008.

Dan Smith, director of Newport based M4 Property Consultants is of the opinion that this significant change provides tenants with good opportunities to take advantage of the current climate.

He explained, “There are fewer tenants in the market willing to commit to longer term leases at the moment.

Some of the stand out findings particularly relevant to SME’s, which account for the majority of businesses in South East Wales are that lettings in this sector are even shorter at just 4.1 years, 78.3% of newly granted leases for SMEs in 2011 were under 5 years in length, 19.2% for up to 10 years and just 2.1% for up to 15 years.

High street retail units lease lengths decreased to 7.6 years compared to 9.7 years n 2007.”

Continuing Dan highlights why he is of the opinion that it is a good time for tenants to act. He said, “Landlords are now offering rent free periods on relatively short term leases.

The report findings showed that 32.9% of retail leases under 5 years and 35.5% of industrial leases for the same duration offered this type of incentive. Break clauses are also become more available.”

Why are landlords offering these incentives?

Dan explains, “Landlords are realising that they need to provide attractive proposition to potential tenants to encourage them to move into their properties.

Put simply, landlords will be incurring costs to maintain their buildings whether they are occupied or not.

Demand for properties has decreased and tenants are realising that their powers of negotiation have dramatically improved especially when they are assisted by commercial property consultants. It is a tenants market and now is a great time for them to occupy.”