by Shane Henson — May 30, 2012—According to findings from an independent study of commercial U.K. property tenancies conducted by the British Property Federation and Investment Property Databank (IPD), there has been a decline in lease lengths to a new low of 4.8 years on average as landlords work in step with tenant requirements.
The survey is drawn from more than 100,000 retail, commercial and industrial leases and is the largest of its kind in the United Kingdom, says the British Property Federation. The survey data shows:
- Average leases lengths have fallen from 6.2 years in 2007 to 4.8 years in 2011.
- Lettings to small and medium-sized enterprises (SMEs) are even shorter, at 4.1 years.
- 78.3% of newly granted leases in SMEs in 2011 were under five years in length, 19.2% for up to 10 years, and only 2.1% up to 15 years.
- High-street retail units saw a further reduction in lease lengths, falling from 7.7 to 7.6 years.
- Rent-free periods are quite commonplace on even relatively short leases: 32.9% of retail leases under five years, and 35.5% of industrial leases of the same duration.
- Lettings to small and medium-sized enterprises (SMEs) are even shorter, at 4.1 years.
“The ‘necessary evil’ for landlords to sign a short lease to secure income to offset their short-term liabilities is increasingly becoming the norm,” explains Greg Mansell, senior research manager at IPD. “Weak occupier demand, off-the-back-of-austerity cuts, and the return to mild recession has left landlords struggling to let their properties, and thus they are accepting ever shorter leases.”
