Tenants’ willingness to exercises break clauses in their property leases has fallen sharply.
Independent Property Data and Strutt & Parker’s joint review found in 2008 just 24% of tenants exercised their break clauses, compared to 43% in 2007.
Landlords are doing their best to make existing tenants feel really welcome. When rental values are falling and rental voids are growing, the last thing a landlord wants is to lose a tenant. This gives rise to service charge shortfalls as well as empty rates liability. In some ways, the worst of it, from a landlord’s perspective, is the uncertainty of not knowing when the space will be reoccupied. Landlords are offering financial incentives not to exercise break clauses including:-
Reduced rents
Dilapidation deals
Refurbishment contributions; and
Capital payments
In over 75% of cases, landlords are succeeding in retaining their tenants but occupiers are making them have to work hard.