Record short leases threaten income security

By Bridging Loan Directory -

 

More than three-quarters of UK leases signed last year were for five years or fewer – threatening income security and financing for future development, according to the British Property Federation (BPF) and reported by IP Real Estate.

The number of ‘stop-gap’ leases increased to 76% last year, up from 63%, with leases falling to an average of 4.8%, according to the BPF/IPD annual lease review published earlier this week.

The report’s authors identified polarisation in the market, with large corporate tenants on average signing leases of 5.2 years, and SME lettings averaging 4.1 years.

The UK’s largest lease review, which is based on more than 100,000 leases across sectors, includes more than 10,000 new leases signed last year.

It found rent-free periods were “quite commonplace” even in short-term leases, featuring in 32.9% of retail leases and 35.5% of industrial leases under five years.

Break clauses as a feature of lease agreements increased slightly from 31.1% in 2010 to 33.2% last year.

According to the report, weak occupier demand meant landlords were forced to accede to tenant-benefiting clauses, despite the potential for more voids.

Meanwhile, public attitudes in the UK could pose as great a threat to development projects as lack of financing.

In a presentation given yesterday at a BPF conference, polling firm Ipsos Mori chief executive Ben Page reported that almost half of 1,700 adults polled agreed or strongly agreed there was enough development in their local area.

In particular, opposition to housing was strongest where the need was most acute – despite 76% of respondents agreeing that Britain faced a housing crisis.

“The interplay between protect and progress makes for unsettled, conditional opinion,” said Page.