Office Leases – How Long?

Recent research by property consultant Strutt & Parker and MSCI (underlined by recent Metropolis research) reveals that lease lengths have fallen to an historical low, which is leading to a greater volume of office moves than seen in previous decades.

In the last 25 years average lease lengths have fallen from just over 20 years to 7.2 years by early 2015 in all sectors and 6.9 years in the office sector. In fact, if the short leases in serviced office buildings are taken into account the average lease length is set to fall further.

The report reveals that 73% of leases signed in the UK in 2015 were for 5 years or less. ten year leases are now a relative rarity, although generally, the larger the building and tenant the longer the lease.

London office leases average 6.3 years, with South East leases at 6.1 years. Nearly 38% of office leases include a tenant lease break option and are most common in leases of 6-10 years.

Perhaps of most interest to companies operating in the office relocation market is the outcome of decisions when companies approach lease expiry. The survey shows that 71% of office tenants vacated their offices at or in advance of expiry with 26% renewing.

Of those tenants that renewed their leases, 43% waited to within 3 months of the renewal date to sign the new lease. Those tenants that moved commonly relocated to a building with less expensive rents. However only 24% of office tenants with a lease break option exercised that option.

In conclusion, with large numbers of office tenants taking short leases and increasingly looking to vacate premises when leases expire, the business opportunities to assist office tenants in relocations have never been higher. Metropolis provides a weekly digest of many of these opportunities.

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