Landlords offering shorter leases - commercial mortgages

05 November 2007

Landlords with commercial mortgages are providing shorter leases to tenants in a response to the changing conditions seen in the commercial sector, according to research from Investment Property Databank and the British Property Foundation (BPF).

The report has suggested that such trends indicate that the industry is willing to offer tenants suitable terms and greater flexibility.

The average lease has fallen from 6.2 years to 5.7 years between 2005/6 and 2006/7, the report noted, with the average industrial lease remaining constant but both retail and office leases recording falls.

"Tighter market conditions experienced by the retail sector over the last year seem to be reinforcing the longer term trend across all sectors for shorter leases," suggested BPF chief executive Liz Peace.

"Whatever the cause, in these uncertain times what is important is that the property market is offering a choice of duration of leases that reflects the needs of its customers," Ms Peace added.

The sector could benefit from lower construction rates in the coming years as reduced supply levels will bolster demand, according to a recent Reuters report.