Across the UK, lease expiries are giving space back to the office market. Agreements signed five or ten years ago, in a very different climate, are now coming to an end – with this “flight to quality” meaning tenants are upgrading to premium buildings or rethinking how and where their teams work. As that churn starts to accelerate, older offices that no longer meet occupier demand are feeling the pressure.
The gap between what occupiers now expect and what much of the secondary market can provide has widened significantly. Tenants want legitimate ESG credentials, quality breakout spaces, fitted and ready-to-go offices, as well as flexibility around leases and growth. Too many older buildings are anchored by rigid leases, dated entrances and energy performance that will only become more problematic as regulation tightens.
For some landlords, this shift has hit fast; as void risk affects incomes, incomes affect valuation and valuation cripples refinancing conversations.
Secondary stock isn’t obsolete
Dealing with managed office space day to day, the reality is more nuanced than headlines would suggest. Many secondary buildings are well located, structurally sound and capable of delivering strong returns. What they lack is curb appeal to current occupiers. Industry estimations suggest that the current stock of below-prime central London office buildings could be worth £262 billion if upgraded1, pointing to a revamping issue, not a demolition one.
The mistake is waiting until the vacancy becomes too long-established before acting. By the time a floor has sat empty for months, the building becomes unattractive, leaving a sour taste in potential occupiers’ mouths. Confidence weakens, and negotiations go stale, leaving many buildings desolate – with this vacancy weighing on income, valuation and refinancing conversations.
For landlords, the smarter play is anticipatory asset management. If a lease is viable 12 to 18 months away, the repositioning strategy should already be in motion.
Flex has matured, and so has demand
Flexible workspace is no longer a short-term solution for small businesses and start-ups. Demand has evolved; spaces are bigger, leases are shorter, and tenants are more sophisticated. High-growth sectors continue to seek space that allows them to scale without locking into decade-long rents. Occupiers also want fitted space, dynamic, top-of-the-range amenities and the ability to grow or downsize without any issues.
For landlords, this opens the commercial door. Converting underperforming floors into well-designed, flexible office spaces can and will accelerate lease uptake whilst widening the tenant pool, which helps the wider building strategy. Instead of relying on a single long lease, income can become diversified across several occupiers.
The conversation has changed
Landlord finance is no longer built on maybes. Lenders are interrogating void periods, tenant demand and re-letting prospects more closely than ever.
A flex strategy can improve the refinancing conversations rather than weaken it. It demonstrates adaptive management, market responsiveness and the ability to generate income. It also provides options. Landlords can accumulate capital while stabilising performance and if all goes well, they can always go back to longer leases at a later date.
Acting early
Secondary office stock is not inherently bad or broken. But leaving an empty space to waste is no longer an option. The longer the space sits empty, the harder it becomes to shift market perception, recover service charge, and maintain valuation stability.
The combination of evolving occupier demands and tighter lending is forcing the market to separate passive from proactive landlords. Those who wait are at risk of vacancies becoming their legacy, but landlords who move early can revamp, reprice and come to the market with a whole new offering.
For landlords and investors prepared to adapt, secondary offices could be the biggest oversight in today’s market, and flex is showing up as the most practical and commercially viable way to do it.
