With the supply and demand cycles of the office market facing unpredictable fluctuations during this current credit crunch, companies seeking to relocate or expand their business are finding that the office market is favourable for initiating new property agreements. Naturally, as vacancies continue to increase in London and other parts of the UK (demand falls, supply rises) the prices will continue to decrease in the hopes of enticing new tenants. Over the last year alone, prime rents have fallen by 11% in Central London, while rent free periods for conventional office buildings nearly doubled across the board.
It speaks volumes for traditional offices to offer increasingly attractive rent free period deals, as the frugal business will tend to avoid signing an agreement that locks them into a multi-year lease when the office market is steadily swinging in the tenants' favor. A better option for almost all corporations would be to opt for a short-term office solution--either managed offices or serviced offices--which provide much shorter rental length options (as short as monthly terms). This is especially true when realizing that the free rent periods are only masking the fact that traditional office prices continue to remain as high as ever, while the short-term office solutions will adjust to the current trends of the office market, further giving tenants an advantage in pricing.
With rental deals steadily increasing by all experts' account for the foreseeable future, those companies that wish to capitalize on the favourable tenant office market would do best to avoid leasing business as usual. A study of alternative short-term office options, instead of blindly renewing a lengthy, traditional lease agreement might pay dividends in both the short and long-term.
