Grey space (also referred to as tenant space) is the term used to describe office accommodation that is surplus to the needs of the original tenant but where the lease contract has not yet expired. In such circumstances, the tenant may be seeking to dispose of the space through an assignment of its lease or a sub-letting. The offices might still be occupied or they may have been vacated. Either way, they will remain a liability for the tenant until the expiry of the lease.
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 also often available on far more flexible lease terms than landlord space making it particularly attractive to high growth companies or to those with relatively short term 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. In some buildings it can represent well over 50% of the total floor area.
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 largely invisible because landlords prohibit tenants from erecting ‘To Let’ boards on multi-let buildings. Furthermore, letting agents usually prefer to promote landlord space because leasing grey space is more complicated and time consuming.
Another issue is that the highly competitive deals that can be done on grey space can undermine rents and capital values in the local market. This acts as a disincentive for agents as the erosion of rents and capital values has a negative impact on the majority of their clients (i.e. landlords) and as a result, will reduce their own fee income.
So what is the answer? Well, it is pretty straightforward. Find an agent that specialises in representing exclusively tenants. They should be able to identify every available opportunity regardless of whether it is landlord or tenant space. This should increase your choice, enhance your leverage which in turn should reduce your costs and increase the flexibility of the lease you enter into.
For more information, please call a member of the TAG team on 0161 457 1422 or email us at firstname.lastname@example.org.