The commercial property market in 2024 is poised for significant changes, driven by a combination of legal reforms, sustainability trends, and shifts in tenant-landlord relationships.
This blog explores some of the key developments that are likely to impact the market and what they mean for property owners, landlords, and tenants.
Reform of the Landlord and Tenant Act 1954
The long-awaited review of the Landlord and Tenant Act 1954 is set to take place in Autumn 2024, with the goal of modernising the Act’s provisions to align with contemporary commercial leases. Since its last major update over 20 years ago, the commercial property landscape has changed dramatically, necessitating this review. Here are some of the anticipated areas of focus:
- Security of Tenure: The Act currently grants tenants the right to renew their leases upon expiration. The review may examine how this security of tenure impacts commercial property use and high street revitalisation.
- Contracting Out: The review could address the ability to contract out of the security of tenure provisions, offering greater flexibility for landlords and tenants.
- Grounds for Lease Termination: Potential updates to the grounds on which landlords can terminate leases might be included, affecting the stability and predictability of commercial leases.
- Court Procedures for Lease Terms: The Act’s review could lead to changes in how courts determine new lease terms, such as contractual duration, rent levels, and interim rents.
These changes may have far-reaching implications for landlords and tenants, impacting lease negotiations and property management practices.
Building Safety Act 2022
The Building Safety Act 2022 is another critical development in 2024. The Act introduces new safety requirements for developments consisting of at least two dwellings that are 11 meters or higher. While primarily aimed at residential properties, it also impacts mixed-use developments. Key provisions include:
- Safety Risks Mitigation: Building owners, freeholders, and management companies must implement measures to mitigate safety risks throughout the project’s lifecycle.
- Court Interpretations: As cases relating to the Act make their way through the courts, the legal implications will become clearer, potentially shaping construction contracts and due diligence processes.
The Act underscores the need for greater collaboration between developers, building owners, and safety experts to ensure compliance and minimise safety risks.
Minimum Energy Efficiency Standards (MEES)
Energy efficiency continues to be a major focus in the commercial property market. Since April 2023, commercial properties with an Energy Performance Certificate (EPC) rating below “E” cannot be let or continue to be let. Although the government initially planned to increase the minimum rating to “C” by 2027 and “B” by 2030, recent announcements suggest a more flexible timeline. This development has several implications:
- Future-Proofing Properties: Property owners should consider upgrading their energy efficiency to meet future standards and remain compliant.
- Reduced Energy Costs: Improving energy efficiency not only ensures compliance but also reduces operational costs, benefiting both landlords and tenants.
Energy efficiency will continue to be a priority, with landlords and tenants working together to achieve sustainability goals.
Green Leases and Sustainability Trends
Green leases are becoming increasingly popular, with 40% of tenants across the globe agreeing to sign up by 2025. This will offer opportunities for landlords and tenants to collaborate on sustainability efforts. These leases are evolving to address a broader range of issues, from carbon emissions to social and governance concerns. Here’s what to expect in 2024:
- Enhanced Collaboration: Green leases promote collaboration between landlords and tenants to reduce environmental impact, with a focus on data sharing and energy efficiency.
- Expanded Scope: Beyond energy efficiency, green leases now encompass social responsibility, diversity and inclusion, and employee wellbeing.
- Outcome-Based Goals: Green leases 2.0 focus on measurable sustainability outcomes, encouraging ongoing evaluation and flexibility in achieving these goals.
These developments are driven by regulatory pressures, consumer expectations, and the need for businesses to demonstrate their commitment to sustainability.
Conclusion: Get in Touch for Your Commercial Property Needs
The commercial property market in 2024 is undergoing significant changes, from legal reforms to sustainability trends. Whether you’re a landlord, tenant, or property owner, staying informed about these developments is crucial for success.
If you’re interested in learning more about how these changes might impact your commercial property needs, don’t hesitate to get in touch with us. Our team of experts can provide guidance and support to help you navigate the evolving landscape and find the right solutions for your business. Contact us today to discuss your commercial property requirements.
