Overview

‘Grey space’ is the term used by property professionals to describe office accommodation which is surplus to the needs of the tenant but where the lease contract has not yet ended.

Depending on the circumstances, the tenant may be seeking to mitigate its liabilities (e.g.’s rent, business rates, service charge, building insurance, utilities, dilapidations) by either assigning its’ lease or sub-letting part or all of the space, to another tenant. It may still occupy the premises or it may have already vacated them.

What makes “Grey Space” so attractive

The reason it is worth knowing about this type of space is that it is generally cheaper to rent and less expensive to fit out than comparable landlord space. Interestingly, it is usually available on far more flexible terms than landlord space making it particularly attractive to high growth companies or to those with relatively short-term occupation requirements.

What is surprising is the amount of grey space that is out there. In most property markets it equates to roughly 20% of all the floor space that is available in the market at any one time.

How do I find it?

Before you rush out to hunt for ‘To Let’ boards advertising grey space, there are a few hurdles to get over. For a start, grey space is hard to identify because most lease agreements prohibit tenants from erecting their own ‘To Let’ boards and window banners. This helps landlords prevent ‘grey space’ from competing with their own vacant space within the building. Some might say this is anti-competitive behaviour.

Generally speaking, letting agents prefer to promote landlord space because it is quicker and easier to transact. This means there is a natural inertia baked into the market when it comes to the promotion of grey space.

Another issue is that the highly competitive terms that can usually be struck on grey space will tend to undermine local rents and capital values. This is also clearly bad news for landlords. But it also discourages letting agents from promoting grey space as the erosion of local rents and capital values will ultimately lower their own fee income.

So what is the answer? Well, it is pretty straightforward. Find an adviser that specialises in representing exclusively tenants. They should be able to identify every available opportunity regardless of whether it is landlord or tenant ‘grey space’. This will increase the number of options available to you helping you to maximise your leverage in negotiations. This in turn will help reduce your costs and increase the flexibility of the lease you eventually enter into.

For more information, please call a member of the TAG team on 0161 457 1422 or email us at info@tenantag.co.uk.