Webinar - The Office Lease: The Now and the Future
On Wednesday 9 December experts from Forsters including Head of Commercial Real Estate Andrew Crabbie and Property Litigation Counsel Nichola Padget with speakers Karyn Jones and Peter Watts from Shaw Gibbs were joined by Kate Smith of CBRE discussing the future of the office lease.
You can catch up on the webinar below.
- 2020 has given us the office/toothpaste analogy that no-one expected: for many office occupiers it proved easier to adapt to working from home than they had expected but the bigger challenge may come trying to get the toothpaste back in the tube.
- For occupiers struggling to pay rent, the government has announced that the restrictions for using CRAR, statutory demands and forfeiting based on rent arrears will be extended to 31 March 2021. Debt claims will remain an option and are increasingly being used by landlords.
- If you are refused rating relief or an insurer rejects a business interruption insurance claim, we encourage you to seek advice; you may be able to challenge those decisions. And if your usual lender is not prepared to lend, there are alternative lenders active in the market.
- Collaboration between landlords and tenants is the best way to reduce liabilities and avoid legal action; occupiers facing cash-flow issues should be prepared to share financial information with their landlords. This undoubtedly means having to redo business plans and projections as few, if any, will have anticipated the pandemic or the impact it would have.
- Inevitably occupiers will be reassessing their future office requirements, both the amount of space they require and the way in which the space is used and operates. Very few office occupiers we speak to are expecting office life to return to what it was pre-pandemic.
- Whether occupiers can easily exit their existing leases will depend on what their leases say. The most likely options are exercising break rights (occupiers must be particularly careful to get the notice right and comply with conditions) or assigning or subletting. Alternatively, it is worth trying to negotiate a surrender with the landlord.
- Before lockdown 2, the return to the office was slower in city centres where the workforce is dependent on public transport as compared to other parts of the country where driving into the office is more prevalent. There has been a rise in ‘activity commuting’ (cycling and walking into the office) and that trend is expected to continue.
- Unsurprisingly occupiers are now seeking pandemic related breaks or rent suspension provisions. That aside, we expect the pandemic to accelerate changes we were already seeing (for example, shorter terms and a focus on environmental and sustainability issues) rather than causing seismic changes to leases.
- The office of the future will need to work harder to attract occupiers and flexibility will be key. There is however a limit to the amount of flexibility that landlords will be able to offer given what that means for portfolio valuation and investment.
- The key trends that office developers need to be mindful of are hotelification, agility and technology. Hotelification: the occupier of the future will be looking for properties which deliver collaborative space and integrate wellness amenities; agility: it will want space that can be used fluidly to enable its business to expand and retract with demand; technology: the office of the future will incorporate intuitive technology that helps occupiers monitor how best to use their office space.
Forsters' Commercial Real Estate team is well placed to advise and support on the legal needs and requirements of your office space. View the full range of services and details of our team.