2019 UK Lease Events Review – what are the latest trends
MSCI’s 2019 Lease Events Review, in association with BNP Paribas Real Estate, looks at the latest leasing trends across the UK commercial property sector.
It analyses how leases have changed this year, what are the trends in specific sectors and what are the impact on rent.
The research shows that during the first half of 2019, the average new lease on commercial property signed in the UK shortened by almost 5 months to 6.3 years. This is the shortest lease length since 2012 and only 3 months longer than the 2009 low when the average new lease length was 6.0 years.
The findings also shows that the average unweighted lease length has now shortened every year since 2016’s Brexit referendum with the UK’s current sluggish economic growth and the uncertainty around the Brexit endgame also playing their part in driving the shortening trend.
Looking more specifically at the office leasing market Dan Bayley, Head of London City Leasing, BNP Paribas Real Estate says: “that it has held up incredibly well despite prolonged uncertainty, driven by tech businesses expanding headcount and others moving to more modern offices with better environmental credentials. The good fundamentals of our truly global capital seem to outweigh other factors which might incline occupiers to wait and see. We have seen robust demand for grade A space in central London and particularly in locations close to Crossrail. The issue for next year is not lack of demand but shortage of quality space being developed. In 2019, occupiers have also continued to embrace the wider choice of office space the market now offers with serviced office providers.
The growing offer of flexible office space available is also having an impact. Stephanie McMahon Head of Research BNP Paribas Real Estate, comments: “In a time when demand for flexible space and leasing terms only continues to grow our traditional leasing arrangements are being challenged. With the overall leasing length, decreasing property owners need to ensure their office spaces can easily be adaptable to effortlessly fit the needs of new occupiers. With today’s office space very much driven by tenant needs in terms of facilities and services, adapting to changing requirements will also be key and plug and play fit out has a role to play.“
Industrial is another market showing strength.
Since 2016, occupiers in the industrial sector have had the longest average lease length highlighting the strength in the sector’s underlying fundamentals. From 2002 to 2015, industrial leases were on average shorter than that of both retail and office.
The report analyses lease events for 2019 and year to year to June 2019. The analysis was based on a sample of over 95,000 extant leases held in the MSCI UK Annual and Quarterly Property Universe, and more than 8,900 new leases signed over the last year.
For all the insight read the full report here and don’t hesitate to get in touch with our experts Dan Bayley and Stephanie McMahon for any further questions.
Click here to download the full document.