Office leases, London, Commercial Property Solicitors

London office leases – trends for 2018

Setting aside the City-tower megadeals, with limited new supply balanced against Brexit uncertainty, Steven Haynes, Commercial Property Solicitor at HRJ Foreman Laws looks at current legal trends in the London office market.

Shorter stays – Open plan working has reduced fit-out costs so moving office isn’t as costly as it once was, making tenants more mobile. Coupled with economic uncertainty, the result is that many tenants are only prepared to commit to shorter terms, with 5 years now commonplace in the SME occupier market.

Flexibility – If tenants do sign up beyond 5 years then break clauses have almost become automatic. This still appears attractive to landlords as they know that, barring economic problems, if tenants are happy then chances are they will stay beyond their break.

Rewarding loyalty – As landlords still prefer long-term tenants, we’ve seen an increase in delayed rent-free periods to encourage tenants to stay, with a tenant benefitting from a further rent free period if they don’t exercise their break clause.

The importance of extras – New buildings are full of tenant-enticing features, from basic bicycle storage up to ‘wow’ features like roof gardens. Whereas once tenants would pay most attention to the rent review clause, they are now as likely to ask ‘how frequently can we use the roof garden?’ and want their rights to these amenities clearly recorded in the lease.

Cost certainty – We’re seeing an increasing use of fixed or capped service charges. Whilst these rarely appeal to landlords, many landlords now seem more comfortable provided the charges are set at the right levels.

MEES finally rears its head – Minimum Energy Efficiency Standards (MEES) have been on the horizon for a while and are the subject of a separate blog, but we’re finally seeing it in leases with the market trying to decide how to deal with it. The concern is that for longer leases of 10 years landlords don’t know what the minimum EPC rating will be when they get the property back and need to re-let it. If the minimum rating increases to D over the next 10 yrs, then large swathes of existing offices could be affected, particularly mid-20th century buildings. We’re now seeing obligations on tenants to return premises at the end of the term in a condition which meets the MEES requirement at that date, but tenants are understandably reluctant to agree to such an uncertain commitment and we’ll see what becomes the market norm.

For further lease advice, contact Steven Haynes, Commercial Property Lawyer at HRJ Foreman Laws Solicitors on 01462 471 501 or