Legal Overview

Lease trends in today's market

The investment market has not been immune from the challenges created by the economic downturn but these challenges have created opportunities, encouraged greater efficiencies and promoted innovation, particularly in the lease market.

Whilst still keen to maintain headline rents, landlords are taking a more realistic approach leading to landlords and tenants working together more with greater transparency. Landlords want to fill voids and keep tenants in place, and the rating regime has accelerated this. Understanding occupier requirements such as more space on short term lets or paying rents monthly can be key. Flexible lease terms, break options and all inclusive rents are more common. Tenants are negotiating some very attractive terms which have not been seen for many years including longer rent free periods, cash help towards fit-outs and capped service charges. Turnover rents have also become much more popular in retail leases.

Landlords continue to look for innovative ways of generating new rental income. There has for example been a significant increase in commercialisation within retail schemes. Previously unused space is now home to merchandising units, exhibitions and fashion shows adding vitality, encouraging footfall and consumer confidence. Tenants equally are being up front to ensure that landlords do not take premature hostile action in unexpected situations such as late payment of rents. Tenants are also having to be realistic and accept that there is a limit to the accommodation of their "wish lists" - terms have to reflect a balance between the parties.

This greater emphasis on better communication is set against a climate which is already encouraging collaboration between landlord and tenant in relation to sustainability, carbon footprint reduction and "green leases". Hopefully, this trend in collaboration will continue and form the basis of a more stable and economically advantageous platform for both landlords and tenants for many years ahead.

Clare Hyland - Partner, Cripps Harries Hall LLP