Flexible space solutions: An opportunity for occupiers and investors

Abstract

The introduction of more flexible lease terms within the structure of commercial leases in the UK generates a number of challenging issues for investors, occupiers and their advisers. This emerging structural change requires a new approach to the management and pricing of commercial real estate. This paper examines the factors underpinning the desire for greater corporate agility, including business planning and risk management; globalisation; and existing and proposed changes to accountancy standards. In addition, the paper considers innovation in the supply of space and the substance of space contracts. It is the contention of this research that it is possible for all parties to derive equal utility from greater flexibility by matching occupier and investor requirements. However, any attempt to price the risk reallocation rationally must encapsulate the likelihood of experiencing greater income volatility as well as the probability of a break clause being exercised or, more specifically, the risk of experiencing costs associated with voids and re‐letting.

Citation

O’Roarty, B. (2001), "Flexible space solutions: An opportunity for occupiers and investors", Journal of Corporate Real Estate, Vol. 3 No. 1, pp. 69-80. https://doi.org/10.1108/14630010110811517