UK office occupiers are increasingly opting for shorter leases since the coronavirus pandemic.
Data from Re-Leased has shown that the average office lease length in the UK has dropped by 34% from 52 months in Q1 2019 to 34 months in Q1 2023.
As tenant preferences and strategies shift post-pandemic, occupiers have pivoted away from traditional long leases toward shorter leases in a bid to increase flexibility as they assess hybrid working patterns.
The commercial property management platform found that there was a spike in demand for short-term leases, specifically agreements for up to 12 months, in the past four years.
Figures saw a threefold increase in shorter leases, referring to office leases of 12 months or less, in the first quarter of 2023. Around 48% of all leases signed in Q1 this year fell into this category, compared with 15% in 2019.
Conversely, there has been a 70% drop in leases for terms longer than 10 years. Re-Leased’s analysis, which compiled data from more than 40,000 commercial properties and 125,000 leases, showed that longer-term agreements for more than a decade now account for just 1.5% of all leases.
Tom Wallace, chief executive of Re-Leased, said: “There are a number of forces driving the increased demand for shorter, more flexible lease terms from businesses. While the pandemic is now in the rear-view mirror, companies are still determining what their office requirements will be in this new world of hybrid work. Given this uncertainty, there is a clear reluctance to commit to a long-term lease, especially with the rise in flexible office providers.
“However, this creates a great opportunity for landlords to respond to changing demands by offering simpler short-term leases which streamline negotiations and minimise the need to offer incentives. This responsiveness not only gets them a better return on the space, but it also helps to keep renewal rates high.”
Sam Caulton, chief financial officer of Re-Leased, said: “This is a clear sign that the long-term lease we have been used to for such a long time in commercial property is now a thing of the past. In saying this, I still feel strongly that occupiers want to be in the office; however, they need that flexibility.
“Like many other B2B contracts in other industries, landlords are now managing their leasing relationships with customer services at the forefront, to ensure leases are renewed. We are already seeing net promoter scores (NPS) in public company reporting, which shows how far we have moved in such a short time.”
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