Average UK Lease Term Getting Shorter

Source : The Business Times, November 6, 2007

(LONDON) Challenging UK retail trading conditions have forced commercial real estate landlords to slash lease lengths to attract and keep tenants in their properties, data showed yesterday.

The 10th Annual Lease Review, published by the British Property Federation (BPF) and Investment Property Databank, showed that the average length of a lease fell from 6.2 years in 2005/2006 to 5.7 years in 2006/2007.

The survey draws from detailed evidence of 75,000 tenancies, encompassing a full analysis of lease lengths, break clauses, review cycles, rent free periods and income profiles.

The data showed that 67 per cent of leases struck in 2006/2007 were for five years or less, while less than 3 per cent of leases agreed in the same period were for more than 15 years. Retail leases fell from an average of 7.8 to seven years and office leases fell from an average of 5.7 to 5.2 years. Industrial leases remained the same as the previous year's survey at 4.2 years.

The BPF said that the increase in shorter lease terms reflected the industry's improved ability to offer flexible lease terms to occupiers. -- Reuters