What is the average lease term for a commercial property?

Average length of lease for a commercial property

In the UK, the industry average length of a lease term for a commercial property is 3 to 5 years (three to five years).

Typically, the average length of 3-5 years spans across the three major sectors of commercial premises. Retail, Industrial and Office, all tend to have different averages individually, with offices having the lowest and industrial having the highest medians.

Length of retail leases

In 2020, the average retail lease length term was 5.5 years according to Savills, with plenty of major retailers seeking fixed 10 year terms.

Whilst many major retailers was seeking longer terms in search of security, the report also predicted the figure of new leases signed off under 5 years as 90% by 2022. A figure which has since come to fruition and extended further, as new tenants seek shorter and shorter lease terms.

Office Lease Lengths

The trend spreads to the office sector with lease terms falling 15% in the UK, with the events of 2020 driving the figure even lower in recent years as the market demand flexible and versatile office premises.

Licenses and rolling 12 month terms have become a new norm of the 20’s and data from early 2023 shows the average length of an office lease to be just over a single year. Small businesses and hot desks have significant influence over the office average length as more established firms secure tenancies for much longer with the UK average for medium sized companies to be 6 years

The industrial side of lease terms

The average length of lease term for an industrial unit correlates highly with square footage. Terms range from single year periods under 1,000sqft and over 20,000sqft sits at roughly 6.5 years

The summary

Summarising the average length term of each core sector of commercial property requires an in-depth look into the factors which play part in tenants behaviours and the market conditions which dictate the terms agreeing between landlords and tenants.

Whilst some may point to the pandemic and its effects on average lease terms, other factors such as flexibility, fast business and rapid growth of SME’s certainly play hand in falling terms.

Sources for figures shown in this mini blog are acquired from Savills, JLL, Penning Manches Cooper and other industry leading firms.

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