The market has dramatically changed and timeframes have doubled

The commercial office market across the UK’s regional cities has experienced a noticeable slowdown in deal conversion. While occupier appetite remains buoyant - with office supply constraints in many regional cities - compared to 2017, deals that once progressed from inception to completion within 12 months now frequently take 18 - 24 months to complete.

Lengthening timelines are due to a number of direct factors including layered decision-making processes, ongoing economic uncertainty, and real estate decisions being escalated to more senior leadership, as well as indirect factors such as macroeconomic volatility and rising inflation contributing to increased fit-out costs. Alongside this, legal negotiations such as the inclusion of break clauses and performance-reporting requirements have also made the process more complex, slowing down outcomes.

Significant changes for all occupiers, especially those renewing

The consequences of this are significant: occupiers who don’t recognise the timeframes now involved don’t just risk delays, but reduce their options and leverage with landlords, and could ultimately end up with a weaker outcome. Real leverage requires genuine optionality and when occupiers engage with the market early, define their requirements effectively and ensure their intentions and options are clear, landlords are more compelled to enter into a serious and speedy negotiation process.  

As supply continues to reduce, more occupiers may need to consider pre-lets rather than relying solely on existing availability. Early planning creates more optionality in this scenario and late engagement often means settling for compromised solutions.

Renewals must be treated with the same discipline as relocations 

While we have seen similar situations in the past for relocations and expansions, what’s new about this cycle is that lease renewals are now subject to the same forces. Renewing occupiers must therefore also approach their events early and in the same manner as they would a relocation-style process: if they want to create genuine leverage and achieve the best result, it is vital to consider all options and alternatives in order to work efficiently with the landlord.

Practical steps for occupiers to take to improve outcomes

Occupiers play a crucial role in shaping deal timelines and must be prepared to take proactive steps to set the foundation for efficient transactions. Beginning well ahead of any lease event allows for:

• internal approvals
• defining and validating the brief
• agreeing workplace and organisational strategy
• testing and assessing options
• running technical and financial diligence

Looking ahead 

The slower pace of deal conversion reflects a more cautious and considered approach to decision making rather than weakened demand. Take-up across key UK regional markets remains resilient and, as economic confidence returns, timelines may begin to normalise. 

For now, it is vital that occupiers take the right advice on the full lifecycle of an occupational strategy, starting early, preparing well, creating credible alternatives and in order to secure stronger outcomes.  

Further information

Contact Rob Pearson and Andrew Cooke

For more information, please see here