New research by real estate consultants Core Consult has revealed that UK businesses are sitting on surplus commercial property leases worth as much as £75 billion.
The report reveals that around 20 per cent of all property leased in the private sector is either not in use or has been subletted to losses, suggesting that businesses need to consider how they can manage their property portfolios more efficiently.
These figures are worrying because even though they are taking in consideration the global financial crisis within the last five years, they point to many buildings potentially falling vacant over the next few years.
According to the Financial Times, Howard Cooke, director at Core Consult, said: “It is a real problem for a lot of companies but not one that many do much about. Finding other tenants to take on the leases is tough and the rent you receive is usually a long way below the rent you are paying out for the original lease.”
Firms such as The Co-op and Morrisons have tried to combat this issue by using specialist lease-buying groups that can manage surplus leases.
Nicholas Cheffings, real estate partner at lawyers Hogan Lovells, added: “Operational real estate can be a huge overhead for any business but it is usually unavoidable. Paying for expensive space you no longer need rarely makes sense but the problem in the past has always been finding someone to take on the liability.”
Under English property law, commercial leases continue to favour landlords, with many tenants being responsible for rent, building insurance and maintenance.