Re-Leased, the cloud-based commercial property management platform, has published new data showing the effect of the covid-19 pandemic and current economic uncertainty on the UK office market.
The data reveals that vacancy risk – calculated as the percentage of leases that are rolling with no agreed expiry, meaning that the tenant can legally vacate as they like – stands at 23.5% for UK office leases. This number has increased steadily from 13.8% in March 2020, when the country first went into lockdown as a result of the pandemic.
The continued rise of rolling leases beyond the period of pandemic-related restrictions points to a longer-term shift in the office market. Whilst overall rent collection in the office sector returned to pre-pandemic levels earlier this year, as reported by Re-Leased in its Commercial Real Estate Two Year Review, the news that almost a quarter of UK office leases are at risk of vacancy suggests that the sector is still yet to feel the full impact of the shift towards hybrid working.
Tom Wallace, CEO of Re-Leased, commented: “These figures demonstrate the changing face of office leasing. Even before covid, there was an occupier-driven shift towards greater flexibility and shorter leases. Coupled with the impact of a move towards hybrid working, there remains a fair amount of uncertainty in the office market, with many occupiers still getting to grips with new working patterns and the space requirements they entail.
“Whilst a rolling lease with no fixed expiry does not always mean a tenant won’t stick around, it presents a risk to landlords due to the insecurity of future occupancy and cash flow. In the current climate of economic uncertainty, landlords will be looking for ways to persuade occupiers to renew, whether that be through offering more flexible terms, or by upgrading their spaces to meet the latest wellbeing and sustainability standards.”
Re-Leased’s analysis is based on live rental collection data from over 10,000 commercial properties and 35,000 leases on its UK platform.
Re-Leased’s data is monitored in real-time. This means as new customer data is retrospectively added it can create minimal differences in reports over time.