Lease lengths fall to lowest ever levels
Average lease lengths fell to their lowest ever recorded levels this year, falling by more than ten months to just five years in 2010. Just 3 per cent of small businesses have a lease of more than ten years, according to the BPF/IPD Annual Lease Review.
An independent analysis of 91,000 tenancies shows that small businesses are increasingly signing shorter deals, with 81 per cent on leases of five years or fewer.
Taking account of all sizes of business, 72 per cent of new leases in 2009/10 were for five years or less, and 90 per cent for 10 years or less.
The latest BPF/IPD Annual Lease Review said that 2009/10 was a “significant year for rent free periods and break clauses” as landlords and occupiers contended with poor economic conditions. However, the move towards shorter leases has been constant over a period of more than 10 years.
The research revealed that the average lease length for a small or medium sized business was just over four years. The average lease length for a large company was 6.6 years.
Liz Peace, chief executive of the British Property Federation, said: “Leases have changed significantly over the past two decades with profound implications for landlords and tenants. For small businesses, shorter leases are probably a good thing, with the pace of business change so fast these days it makes little sense for most small and medium sized businesses (SMEs) to tie themselves into the obligations of a long lease.
"It is also important, however, that the property market is delivering variety. Long leases still play a crucial part in the funding of development of commercial property, even more so at this time when access to loan finance is severely rationed.”
