• Sectors we work in banner(2)

    Quick Reads

Downsizing in 2023 – options for office occupiers

Now that the festive season is behind us and we have seen in the new year, many of us are thinking carefully about ways to cut back and reduce costs in 2023. Business occupiers are no different.

It is no secret that businesses are operating in particularly challenging times. The Financial Times reported today on the results of their annual poll of leading UK-based economists, which concluded that the UK may be facing one of the “worst and longest” recessions in the G7 in 2023.

Alongside this, businesses are still working out how best to implement flexible working into their daily operations. EG has discussed a recent Colliers’ report which suggests that, in light of the increase in flexible working, “almost one-third of corporate real estate professionals expect to lessen their space requirements by 20-30%”.

So, if you are considering reducing your office space, what are your options? We consider a couple of these below, but these are not exhaustive and other options might be available.

Subletting

If you have a separate lettable space within your premises that you do not need, you could consider subletting that space to a third party. Whilst this would not affect the rent you pay to your landlord for your premises, it could generate rental income from your subtenant and offset your costs. You could even consider subletting an entire property if it was surplus to your requirements.

Your lease will set out any restrictions on your ability to sublet part of or the whole of your premises. Typically landlords like to place restrictions on which sections of the property can be sublet. If your premises can be sublet (whether in whole or part), then generally speaking any subletting will require the consent of your landlord, which usually must not be unreasonably withheld or delayed.  Your lease may also set out specific terms which any sublease must contain – for example, a minimum rent value for the subtenant to pay or a maximum length of the term of a sublease. Your lease may also include restrictions on the nature of the subtenant who would take on the lease.

Ending your current lease early

If your current premises are no longer suitable and you are considering a move to alternative premises, then you may be able to bring your existing lease to an early end. There are a few ways you can achieve this, but each will depend on what has been agreed with your existing landlord:

  • Tenant Break Right – your lease may include a tenant break right, allowing you to bring your lease to an early end subject to fulfilment of specified conditions. Tenant break rights are often fixed to a particular date (for example, a 10-year lease might include a right for the tenant to break at the end of year five, but at no other time). Sometimes break rights are rolling, enabling the tenant to exercise the break at any time subject to giving notice and fulfilling the relevant conditions. It is critical that any conditions are strictly adhered to, otherwise the break right may be invalidated.
  • Surrendering your lease – you may be able to agree with your landlord that you will surrender your lease by way of a Deed of Surrender; thereby bringing it to an early end. Your landlord may request certain terms if they are to agree to this, such as payment of a premium as compensation for them losing you as a tenant or a requirement to undertake certain dilapidations or repair works before ending the lease. It is also important to note that, ultimately, your landlord could simply refuse to accept an early surrender.

Whichever approach you take here, you must also be sure to dovetail the practical elements of exiting one property and entering into another. That is to say that you may not want to end up terminating an existing lease without having a formal tenancy in place for your new property; otherwise you may risk an interim period without a suitable property.

These options will work differently for different businesses. There is no “one size fits all approach” and so businesses will need to think carefully about what suits them (and their way of working day-to-day) best.

The above is a general overview and we recommend that independent legal advice is sought for your specific concerns.  If you require further information in relation to the points raised in this article you should contact Ben Butterworth, a solicitor at Charles Russell Speechlys LLP in the Real Estate team. Ben can be contacted on ben.butterworth@crsblaw.com

"almost one-third of corporate real estate professionals expect to lessen their space requirements by 20-30%"

Our thinking

  • Inside Housing quotes James Walton on the potential financing impact of delays at the Building Safety Regulator

    James Walton

    In the Press

  • CoStar quotes Claire Fallows and Ben Butterworth on some of the key real estate issues addressed in the King's Speech

    Claire Fallows

    In the Press

  • Election countdown: the Conservatives and Labour's position on housing

    Nick Burt

    Insights

  • The Conservative and Labour Manifestos and Renters Reform: Focus on Build to Rent and Student Accommodation

    Lauren Fraser

    Insights

  • The Levelling Up and Regeneration Act 2023 - a tighter planning enforcement regime

    Sadie Pitman

    Insights

  • Property Patter - Great Estates Miniseries - part 1

    Cara Imbrailo

    Podcasts

  • Easements - watch out for Prescriptive Rights!

    James Bateman

    Quick Reads

  • It’s not just a High Court decision, it’s a successful M&S High Court Decision

    Sophie Willis

    Quick Reads

  • The key updates to the NPPF on housing delivery

    Titilope Hassan

    Insights

  • What does the Levelling-up and Regeneration Act 2023 mean for nutrient neutrality?

    Sophie Willis

    Insights

  • The countdown to mandatory biodiversity net gain

    Rachael Davidson

    Insights

  • The Levelling-Up and Regeneration Act 2023 & compulsory purchase

    Claire Fallows

    Insights

  • A new option for varying planning permissions

    Titilope Hassan

    Insights

  • The Infrastructure Levy – a new tax on development

    Sophie Willis

    Insights

  • Ready, set, commence: The new commencement notice under the Town and Country Planning Act 1990

    Titilope Hassan

    Insights

  • Environmental Outcome Reporting: Overhauling EIA?

    Rachael Davidson

    Insights

  • The challenges of offering affordable housing in rural areas

    Titilope Hassan

    Quick Reads

  • Planning essentials case update: Does an enforcement notice subsist against a site?

    Sadie Pitman

    Quick Reads

  • Key takeaways from the UK Government's "Green Day"

    Martha Glaser

    Quick Reads

  • High Court rules on s38 agreement to adopt land up to boundary: What developers need to know

    Anna Donnelly

    Quick Reads

Back to top