Short-term leases on commercial property on the rise
Short-term leases on commercial property are becoming increasingly common. The Financial Times reported recently that the length of UK office leases has fallen to the lowest level on record and that almost half of office leases are for 12 months or less. This is a considerable change and a trend that Bird & Lovibond have noted when dealing with commercial lease negotiations.
What are the advantages of a short-term lease?
Quick entry and exit
The main advantage of a short lease is the opportunity to move in and out quickly. Negotiations for a short lease are generally less onerous than a longer-term lease and its terms easier to agree. You also have the benefit of being able to exit the property quickly. At the end of the term, you may be able to extend the lease if required.
Flexibility
If you sign for a long lease, you need to have a strong prediction for your firm’s performance over that period. A short-term lease can be a better option for a new business, especially if you are uncertain as to how the business will grow. Or it may be beneficial for a more established business if there is a changing or volatile market.
Freedom to adapt
During and since the pandemic, working patterns have changed considerably. Many employees work from home for a fair amount of their working time. As a result, some firms looked to downsize to reduce space and costs. By contrast, some businesses may have grown since the pandemic and looking for larger space. Taking a short-term lease gives the business flexibility to review their requirements and the freedom to adapt to changing need.
What are the disadvantages of short-term leases?
Lack of security
A short term lease provides less long-term security. Signing a longer-term lease allows you to have greater stability. Premises costs are a major part of any budget, and a longer lease provides a more reliable prediction of future costs.
A less favourable deal
Landlords generally want tenants in their properties for a longer term. They incur costs in both time and money when finding new tenants. As such, landlords are more likely to give preferential terms and rental rates for longer leases and less likely to negotiate terms on a short lease.
For further information and advice on commercial property leases please contact:
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