Small businesses dodge rent reviews

Average lease lengths for small companies fell to their lowest ever recorded levels this year, falling by more than 10 months to just five years in 2010.

A survey of 91,000 tenancies has found that small firms are increasingly signing shorter deals, with 81% on leases of five years or less, and are therefore unlikely to face a rent review. By comparison, just over 3% of small companies currently have a lease of over 10 years.

The research conducted by the British Property Federation (BPF) and the Investment Property Databank (IPD) revealed that 2009/10 was a significant year for rent free periods and break clauses, as small businesses and their landlords struggled with poor economic conditions.

Chief executive of the BPF, Liz Peace, said: “Leases have changed significantly over the past two decades with profound implications for landlords and tenants. For small businesses, shorter leases are probably a good thing, with the pace of business changing so fast these days it makes little sense for most small and medium-sized businesses to tie themselves into the obligations of a long lease.

“Shorter leases have undoubtedly meant fewer businesses found themselves in trouble during the recession and therefore were able to survive it.”

© Crimson Business Ltd. 2010