The demand for flexible office space continues to rise as businesses seek adaptable, cost-effective solutions to accommodate hybrid working models and fluctuating workforce needs. Following on from our latest Irwin Mitchell Office Occupier Survey 2025, we found that 44% of businesses surveyed are looking to supplement their existing space by incorporating some form of flex space into their portfolios.
We have several clients in the flexible office sector, most of whom take on leases within buildings to run their businesses rather than purchasing them, given the considerable amount of capital needed to do so. For flex office providers, securing the right lease terms is crucial to ensuring both profitability and operational success.
Unlike traditional office occupiers, flex office providers operate on short-term, high-turnover occupancy models. This means the terms they negotiate with landlords must allow for maximum agility while mitigating risks associated with long-term commitments. Below, we outline the key factors flex office providers should consider when entering into lease negotiations with commercial landlords.
Lease term and flexibility
The lease duration is a fundamental consideration for any flex office provider. While landlords typically prefer long-term leases to secure stable income, flex office operators require a balance between commitment and adaptability. When negotiating lease terms:
• Break clauses should be negotiated to allow the provider to exit the lease early if market conditions change or if the location underperforms.
• Renewal options should be included to provide continuity in successful locations.
• Tenant-friendly alienation provisions (such as assignment and subletting rights) can provide an exit strategy in case the business model needs to shift.
• Ensuring these elements are embedded in the lease agreement can protect a flex office provider from being locked into an unviable property for too long.
Permitted use and operational flexibility
Most standard office leases restrict the way a property can be used. However, flex office operators require broad permitted-use clauses that allow them to provide co-working spaces, private offices, meeting rooms, event spaces, and ancillary services.
Key negotiation points include:
• Ensuring the lease expressly permits short-term subletting or licensing of space to multiple occupiers.
• Avoiding restrictions on changing the office layout or installing necessary infrastructure, such as high-speed broadband and meeting room partitions.
• Clarifying exclusivity rights, preventing landlords from leasing to competing flex space operators in the same building.
• A carefully worded permitted use clause will provide the operational freedom needed to maximise revenue.
Rent structure and service charges
Flex office providers need predictable cost structures to maintain profitability, as revenue is generated from a fluctuating tenant base. Key considerations when negotiating rent include:
• Turnover rent options, where rent is linked to revenue, can help align landlord and tenant interests.
• Stepped or phased rent structures that allow the business time to build occupancy before full rent kicks in.
• Caps on service charges to avoid unpredictable increases, as flex office providers typically pay a share of a building’s running costs.
• Since flex office operators depend on a competitive pricing model to attract occupiers, avoiding rigid and high-cost rental structures is essential.
Fit-out, repairs and dilapidations
Unlike traditional office tenants, flex space providers often need to invest significantly in fit-outs to create attractive, functional workspaces. When negotiating lease terms, it is important to establish:
• Landlord contributions to fit-out costs, particularly where upgrades enhance the building’s value.
• Responsibility for repairs, ensuring that obligations to maintain the premises (particularly common areas) do not fall disproportionately on the flex provider.
• Dilapidations liability, which can be costly at lease-end if the landlord demands full reinstatement of the premises. A “no reinstatement” clause should be sought to avoid excessive exit costs.
These negotiations can significantly impact the provider’s bottom line, making early discussions crucial.
Security of tenure
Flex office providers should carefully consider their rights under the Landlord and Tenant Act 1954. While many landlords insist on lease exclusions from statutory renewal rights, some providers may prefer security of tenure in successful locations.
Understanding and negotiating these terms ensures a flex provider does not face unexpected upheavals that could impact their business continuity.
Branding, signage and exclusivity
Branding is key to attracting tenants in the flex office market. However, landlords often restrict external signage and branding rights. Negotiating clear branding provisions can ensure:
• The right to display prominent signage both externally and within the building.
• Marketing rights to use the building’s address and features in advertising materials.
• Restrictions on landlords leasing space to direct competitors, preserving the unique appeal of the flex operator’s offering.
• These rights are essential for differentiation in a competitive market and must be addressed at the outset.
Exit strategy and early termination
Given the fast-changing nature of the flexible office sector, having a clear exit strategy is critical. Beyond break clauses, providers should ensure:
• The right to assign the lease or sublet the entire space to another operator if the business needs to pivot.
• The ability to negotiate an early surrender agreement, potentially with a pre-agreed compensation structure for the landlord.
• A clear handover process to avoid disputes over dilapidations or outstanding obligations.
• A well-structured exit plan provides financial protection and operational resilience.
Be prepared
Securing the right lease terms is fundamental to the success of a flex office provider. The key to a successful negotiation is balancing landlord expectations with the flexibility required to operate a dynamic, multi-occupancy business model.
By proactively addressing issues such as permitted use, rent structures, repair obligations, branding and exit strategies, flex operators can create sustainable, profitable arrangements that support long-term growth.
Read the findings of Irwin Mitchell’s Office Occupier Survey 2025
Delver Punia is a solicitor in the real estate team at Irwin Mitchell
Green finance opportunities in the UK
The survey also highlights the rise of green finance – Ayesha Hasan and Paddy Sturman share their insights
In 2024, the UK green finance market reached £134.47bn, with projections indicating growth to £283.04bn by 2033. This highlights the nation’s commitment to sustainability. Green finance, including green bonds, mortgages and loans, is becoming integral to the UK commercial property market, offering substantial financial and reputational benefits to businesses.
The UK government’s ambitious goal to reach net zero by 2050, supported by initiatives like the Green Finance Strategy and the UK Infrastructure Bank, is driving the growth of green finance. Investors are increasingly integrating ESG criteria into their strategies, and consumer preferences for environmentally responsible businesses continue to rise. As a result, businesses are adopting green finance to enhance their environmental credentials and meet stakeholder expectations.
According to our Office Occupier Survey 2025, 35% of businesses surveyed have already obtained green financing for their occupation costs, with a further 43% considering doing so in future. A similar trend is visible for businesses opting for green financing over standard debt financing, highlighting that UK businesses are seeking alternative methods to traditional financing to meet their ESG initiatives.
In particular, our research revealed that office occupiers consider building performance and energy efficiency to be the most important environmental criteria when choosing office space (42%) and will pay a higher rent for environmentally friendly office space (47%), as long as this leads to a reduction in service charge or energy bills.
Benefits of green finance
Green finance offers several benefits, including:
• Access to capital: Provides businesses with funds earmarked for sustainability projects, enabling investments in energy-efficient technologies and infrastructure improvements.
• Enhanced reputation: Boosts a business’s corporate social responsibility profile and appeals to consumers who prioritise sustainability.
• Regulatory compliance: Helps businesses meet strict environmental standards and regulatory requirements, positioning them favourably with authorities and stakeholders.
• Attracting ESG investors: Appeals to ESG-conscious investors, expanding the investor base and appealing to ethically driven capital.
• Improved asset value: Properties financed through green finance often enjoy higher demand and retain value better than conventional properties due to their sustainability credentials.
Options available
Lenders play a crucial role in the green finance landscape by offering products and preferential terms. These products finance projects that contribute to decarbonisation, such as renewable energy installations and sustainable infrastructure developments. They include:
• Green mortgages: Used for purchasing, building, or redeveloping properties to meet environmental targets. They offer benefits like reduced operational costs and may require a minimum energy performance certificate rating to qualify.
• Green loans: Cover a wider range of projects, including sustainability upgrades like solar panel installations. They tend to have more complex terms than green mortgages, focusing on the property’s performance against globally recognised sustainability standards.
• Green bonds: Finance or refinance environmentally friendly projects. In 2024, the green bond market in the UK outperformed the conventional UK bond market by almost 2%. Green bonds provide preferential lending terms, and investors are increasingly willing to accept slightly lower returns in exchange for environmental benefits, known as the “greenium”.
Challenges
While these options provide significant opportunities, businesses must also navigate several challenges in the UK commercial property market to effectively implement green finance solutions:
• High upfront costs: Significant initial investments for green projects can deter property owners and developers. These costs include purchasing energy-efficient technologies, retrofitting buildings, and implementing sustainable practices.
• Regulatory uncertainty: The evolving landscape of regulations and policies creates uncertainty for investors and developers, making it challenging to plan and commit to long-term projects. Changes in government policies, tax incentives and environmental standards can impact the feasibility of green finance solutions.
• Limited awareness and expertise: There is still a lack of awareness and expertise among property owners, developers and financial institutions regarding green finance options. Many may not fully understand the benefits, processes, or available products, hindering the adoption of green finance solutions.
• Measurement and verification: Tracking the environmental impact of green projects is complex and resource-intensive, involving energy savings, carbon reductions and other metrics. Reliable data and standardised methods are essential, but inconsistent practices can be challenging.
What’s next?
Despite these challenges, green finance in the UK commercial property market looks very promising, driven by technological advancements, stricter government policies and increasing demand for ESG investments. Global collaboration on climate change and improved risk management will further boost its adoption. This presents opportunities for businesses to enhance their environmental credentials, reduce costs and attract investment and consumer goodwill. By utilising green finance options, businesses can contribute to a sustainable future while enjoying financial and reputational benefits.
Ayesha Hasan is a partner and head of London real estate transactions and real estate finance, and Paddy Sturman is a partner and national head of banking and finance at Irwin Mitchell LLP
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