Commercial Property Tenancies

The British Property Federation (BPF) has also  published a press release stating that "The largest independent study of commercial property tenancies will reveal,  next week, a fall in lease lengths to a new low of 4.8 years on average, as landlords work in step with tenant requirements."

An increasingly polarised market has developed over the past year, with some long term deals on prime property, but also a tendency for some occupiers to opt for a 'stop gap', rather than more medium term leases.

The annual study by the BPF and Investment Property Databank (IPD), the property industry's global benchmarking metric, found that 76% of new leases signed in 2011 were for fewer than five years in length. Leases signed in 2011 averaged 4.8 years - a decline of well over one year compared with pre-recession levels in 2007.

The survey is drawn from more than 100,000 retail, commercial and industrial leases and is the largest of its kind in the UK.

The data will show:

• Average lease lengths have fallen from 6.2 years in 2007 to 4.8 years in 2011;
• Lettings to 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 (in 2007 they 9.7 years);
• Rent free periods are quite commonplace on even relatively short leases: 32.9% of retail leases were under 5 years, and 35.5% of industrial leases of the same duration.

Liz Peace, Chief Executive of the British Property Federation, said: "In uncertain times, it is quite understandable that occupiers are opting for shorter leases. The long term trend has, for some time now, been towards a shorter lease, but this has been accentuated over the past year by economic circumstances."