.png)
Back To Blogs
June 15, 2026
Level Workspace
24 mins
Most UK office tenants approach a lease event the same way. The landlord's agent signals a renewal rent. It feels too high. Someone runs a quick search on Rightmove Commercial, tours two buildings, and forms a view — usually emotional, usually premature. The question crystallises as "should we move?" when the question that actually needs answering is: which option produces the lower total cost over the period we care about, and what is the risk on each side?
These are not the same question. The answer almost never lives in the headline rent. It lives in the incentive package, the capital costs, and the costs — dilapidations, professional fees, disruption — that neither the landlord's agent nor the letting agent volunteers. On a typical UK office move, the breakeven (the point where relocating becomes cheaper than renewing) lands somewhere between 24 and 48 months from the lease event. Inside that window, moving is more expensive than renewing on almost any reasonable assumption. Beyond it, the move can pay back — but only if the model is built honestly.
This article builds that model. The worked example uses illustrative figures anchored to current market data; the framework is what travels into the boardroom. Your specific numbers will differ. The discipline does not.
Before the model, a conceptual point that saves FDs from building the wrong spreadsheet.
Question A: what is the lowest total cost of staying? This is the renew-or-re-gear analysis. It includes negotiating the landlord's opening rent position down, securing rent-free or a capital contribution on the renewal, accepting a longer term in exchange for better economics, and (where possible) extracting a tenant break, service charge caps, or a capped rent review. This is where most of the leverage lives.
Question B: what is the total cost of the best realistic alternative? This is the relocation analysis — finding the right building, negotiating the incentive package, modelling fit-out capex, modelling exit costs from the existing building, and accounting for downtime and disruption.
You cannot meaningfully compare A and B until you have built both with the same rigour. Most tenants build one in detail and the other casually. They then make a decision on incomplete information.
One observation worth making explicit: in practice, the act of building Option A properly often makes Option B unnecessary. The renewal analysis discovers leverage the tenant did not know they had. The landlord knows whether the tenant has a costed alternative; the tenant who does extracts materially better terms than the one who does not.
The model fails when it misses line items. Here are the groups — each one matters.
Rent is the starting point, but it must be compared on a consistent basis. IPMS 3 (net internal area), NIA, and GIA all measure floor area differently; a building quoted at £70/sq ft on NIA and another at £68/sq ft on GIA may not be what they appear. Use one area basis for all three scenarios.
Service charge runs alongside rent and deserves its own line. The 2024 Assure Office Index records a Tier 1 median (large multi-let buildings) of £15.71/sq ft and a Tier 4 median (smaller buildings) of £6.00/sq ft. Central London Grade A buildings typically fall in the £12–£18/sq ft range, and the highest-amenity buildings now exceed that ceiling. A newer building often carries a higher service charge than an older one, even at a lower headline rent — a fact that disappears in headline-only comparisons.
Business rates changed materially from 1 April 2026. The 2026/27 multipliers for England are: 48.0p in the pound for the standard rate (RV £51,000–£499,999), 50.8p for the high-value rate (RV £500,000 and above), and 43.2p for the small business rate (RV under £51,000). A different building means a different rateable value; at £500k+ RV, the 50.8p multiplier alone creates a six-figure annual delta between buildings with similar asking rents. Check the rateable value on the VOA's public register before building any model.
Utilities, FM, and IT operating costs belong in the model under Total Cost of Occupancy, ideally per desk or per sq ft. These are genuinely building-specific and often ignored until completion — at which point it is too late to renegotiate.
Fit-out capex is the single largest variable in the entire model, and the one most tenants get wrong. UK office Cat B fit-out costs in 2025, drawing on Turner & Townsend's Global Office Fit-out Cost Guide 2025 and Cushman & Wakefield's 2025 UK Fit-out Cost Guide:
Regional cities run 15–25% below London, consistently. A Manchester mid-spec fit-out that costs £90/sq ft in London may cost £68–£76/sq ft in Birmingham or Leeds.
Dilapidations on exit is the cost line tenants most systematically underestimate. Typical exposure runs from £10/sq ft for light reinstatement of a recent Cat B fit-out in a modern building to £40/sq ft or above where full strip-back to Cat A or shell-and-core is required (Spectrum Workplace, Creation Office, Buon Construction, 2025–2026 fit-out guides; methodology per RICS Dilapidations Guidance Note, 7th ed., and the Pre-Action Protocol for Dilapidations Claims).
The legal ceiling matters here. Section 18(1) of the Landlord and Tenant Act 1927 caps the landlord's dilapidations damages at the diminution in value of the reversion — the reduction in what the building is worth because of the disrepair. Where the landlord intends to redevelop or substantially alter the premises, that diminution may be nil (the second limb of s.18(1), on "supersession"). The case Peachside Limited v Lee & Keung [2024] EWHC 921 (TCC) — the most recent reported decision on both limbs — demonstrates that landlords are not automatically defeated by a redevelopment defence; where a phased plan of repair-then-redevelop exists, the cap may apply to the repair phase only. Get a s.18(1) valuation before accepting any landlord's schedule. The gap between the cost of works and the s.18 cap can be the largest single negotiating variable in the exit.
Relocation costs — physical move, IT and AV infrastructure, structured cabling, signage, letterhead, employee communications — typically run £5–£25/sq ft in total. IT and AV alone account for most of this range (Creation Office, UK Fit-out Costs, 2025); physical removal services add £2–£8/sq ft on top.
Professional fees — project management, interior design, building surveying, and legal fees on both the new letting and the exit — typically run 8–15% of gross fit-out capex, plus £15,000–£75,000 in legal fees depending on deal size and complexity.
Stamp Duty Land Tax on a new commercial lease is calculated on the net present value (NPV) of rent over the term, discounted at 3.5% per annum. The rate is 0% on the first £150,000 of NPV, 1% on the next £4.85m, and 2% above £5m. On a 10-year, 12,000 sq ft lease at £68/sq ft with a 24-month rent-free period, the NPV runs to approximately £5.2m and the SDLT liability to approximately £53,000. Model this properly — it is non-trivial and frequently missed entirely.
Rent-free periods on 10-year Grade A office leases in 2025–2026 (drawing on Avison Young's Big Nine Q1 2025 and Savills' Central London Office Market Watch, Q1–Q3 2025):
[ Table 1 — paste HTML Embed here ]
These are not guaranteed. They reflect current deal flow at the moment of writing and vary materially by building, landlord balance sheet, submarket supply, and covenant strength. A building 18 months into a void gives more; a building with two competing heads of terms gives less.
Capital contributions — direct cash payments from landlord to tenant against fit-out costs — have become standard on competitive Central London deals. On a prime 10-year lease, contributions typically run £40–£100/sq ft. Regional markets offer less. These figures reflect broker consensus and are not publicly tabulated by the major agencies; individual deal terms remain confidential.
All figures are illustrative and submarket-specific. A reader building the same model for a different building, submarket, or lease term should expect materially different results. The discipline — not the numbers — is what travels.
The setup: A mid-market professional services firm occupies 12,000 sq ft on the City fringe. The lease, granted in 2017 and reviewed in 2022, now runs at £55/sq ft passing rent. Contractual expiry is 2027; the tenant is 12 months from a Section 25 notice under the Landlord and Tenant Act 1954. The existing fit-out is mid-spec Cat B, installed in 2017 — partially depreciated and in need of refresh regardless of outcome. The business runs 95 staff across 110 desks.
The landlord opens at £72.50/sq ft, 6 months rent-free, no capital contribution, a 5-year upward-only review.
The tenant's target position: £62/sq ft, 12 months rent-free, a year-5 break, and a capped RPI review (3% cap, 1% collar).
The renewal requires a light Cat B refresh — not a full re-fit — estimated at £45/sq ft = £540,000. No dilapidations exposure arises because the tenant stays. No relocation cost. Legal fees at renewal: £25,000.
Rateable value on the current building is approximately £620,000 (at the 2023 revaluation); the 2026/27 high-value multiplier of 50.8p applies.
[ Table 2 — paste HTML Embed here ]
A viable alternative building sits nearby. The headline rent is £68/sq ft on a new 10-year term. The incentive package: 24 months rent-free and a £75/sq ft capital contribution against fit-out costs.
Fit-out: mid-spec Cat B at £110/sq ft across 12,000 sq ft = £1,320,000 gross, offset by a £900,000 capital contribution (12,000 × £75), leaving a net fit-out cost of £420,000.
Dilapidations on exit from the existing building: the landlord's schedule runs to £35/sq ft. Negotiated down, using a Section 18(1) valuation, to £25/sq ft = £300,000.
Physical relocation, IT, and AV costs: £15/sq ft = £180,000. Project management, design, and building-surveying fees at 12% of gross fit-out: £158,400. Legal fees (new letting plus exit): £55,000. SDLT on the new lease (NPV approximately £5.24m at 3.5% discount, accounting for the 24-month rent-free): approximately £53,000.
The 24-month rent-free covers the fit-out period and post-occupation run-in, with the three months of genuine downtime covered by the rent-free.
[ Table 3 — paste HTML Embed here ]
On these numbers, Option A is cheaper by approximately £603,000 over a 10-year term. The longer rent-free on Option B partially offsets the higher one-off costs; Option B's net effective rent (£54.40/sq ft) is marginally lower than Option A's (£55.80/sq ft), but not low enough to overcome the £576,000 in additional one-off costs before professional fees.
The cash-flow picture is more nuanced. In Year 2, Option B's additional rent-free generates a £732,000 advantage over Option A (which starts paying rent in Year 2). The cumulative cost curves cross twice: once around month 24 (B becomes cheaper) and again around month 36–40 (A pulls back ahead permanently). This is the breakeven window the model must expose. A tenant on a 5-year lease will never recover Option B's upfront costs. A tenant on a 15-year lease almost certainly will.
Each of the following is a realistic variation on the central case. Each moves the answer materially.
If the renewal rent settles at £68/sq ft rather than £62/sq ft — the landlord holds firm and the tenant lacks leverage — Option A's 10-year total rises to approximately £12,739,000. Option B wins by £45,000. A marginal result, but the direction reverses.
If the relocation building offers 18 months rent-free rather than 24 — tighter market, competing tenant — Option B's total rises by over £400,000. Option A wins by more than £1,000,000 over 10 years.
If the fit-out runs 20% over budget — common on buildings with poor services condition, listed status, or complex procurement — the gross fit-out rises to £1,584,000 and the net figure to £684,000. Option B's total rises accordingly; the gap to Option A widens by £264,000.
If dilapidations are negotiated to £15/sq ft rather than £25/sq ft — a realistic outcome with good s.18(1) advice — the gap between A and B narrows by £120,000.
If the tenant takes a 5-year term rather than 10 — perhaps with a break at year 3 — Option B's capital costs spread over fewer years of lower rent. Option A wins decisively; the breakeven window never arrives.
Every one of these variables is a data point the tenant cannot get from public sources. The model is only as good as the inputs. The inputs are what tenant-representation surveyors know and tenants do not.
Even careful tenants systematically omit specific lines. These are the most common.
Reinstatement of tenant alterations. Most leases require the tenant to reinstate alterations made during the term. In a building the tenant has occupied for seven to ten years, the reinstatement list can be long. Critically, reinstatement is often more expensive than the original fit-out — it is destructive work in a live or recently vacated building, under access constraints and without the economies of a full fit-out procurement. Pull the lease and read the yield-up clause before modelling anything.
Cat A reinstatement on exit. Some leases require return to Cat A condition — raised floor, ceiling grid, basic M&E — even where the tenant inherited a Cat A space. This is a negotiating point at renewal, not at exit; the time to deal with it is when both parties want to do a deal.
Capital allowances. A tenant claiming capital allowances on its fit-out will carry residual unrelieved expenditure. On relocation, that pool may be partially lost. Take tax advice before finalising the model.
IFRS 16 and accounting treatment. Under IFRS 16 (effective for UK-listed groups from January 2019, and applicable to FRS 102 reporters from January 2026 following 2024 amendments), rent-free periods and capital contributions reduce the lease liability and right-of-use asset at commencement. The effect is that the P&L records depreciation on the ROU asset and interest on the lease liability, rather than a step-change in rental expense. For PE-backed businesses, listed groups, and VC portfolios with EBITDA or balance-sheet covenants, the structure of the incentive package — cash contribution versus rent-free versus stepped rent — can affect reported metrics materially. Brief the CFO and the auditors before heads of terms.
Rent deposits and personal guarantees. A deposit tied up on the existing lease is recoverable only after dilapidations are agreed and settled. It is a cash-flow item, and on long dilapidations negotiations — which routinely run 12–18 months post-expiry — that cash sits idle. Model it.
Subletting income forgone. If the existing space is sublet-capable under the lease's alienation wording, subletting is a third option alongside renew and move. It is often the right one for businesses with significant under-utilised space.
Each of these lines moves the answer by tens of thousands or hundreds of thousands of pounds. None of them appears on the landlord's agent's letter.
The financial model is necessary. It is not sufficient.
Talent and commute. A move that adds 15 minutes to half the team's commute is a recruitment and retention cost the model does not price. Conversely, a move toward the talent pool — often the reason a City-fringe firm looks at Shoreditch or Aldgate — may add value the model cannot capture either. Quantify what you can; flag what you cannot.
Address and brand. For some businesses — law, finance, certain professional services — address is part of the proposition. For others it is irrelevant. Decide which you are and resist the urge to treat it as a wash.
Workplace strategy and density. The relocation moment is the only practical time to reset desk-to-headcount ratios, meeting room provision, and amenity design. Under-densified businesses (a legacy of pre-hybrid working patterns) can recover significant annual cost per head by redesigning for the actual headcount, not the one from 2019. This value should enter the model as a reduced area requirement — a smaller building at the same quality is often achievable post-hybrid — not as an intangible.
EPC compliance and future leasing risk. The current legal minimum for non-domestic lettings in England is EPC E, under the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015. The government's stated trajectory — EPC C by a proposed interim date and EPC B by approximately 2030 (with the precise deadline subject to a delayed DESNZ consultation response, expected to land somewhere between 2030 and 2035) — has not yet been enacted. It is policy intent, not law. But renewing in a building currently rated EPC D or E is a different risk position from moving to a newly refurbished EPC B building. A lease that expires in 2035 may face a compliance cost the current model ignores.
Score these factors, bring them to the board as a structured trade-off, and resist the temptation to treat them as tie-breakers for a decision the numbers have already made.
The renew-versus-move question is not a static choice between two fixed offers. Both offers move when there is credible competition.
On renewal: the landlord's opening position softens materially when the tenant has a viable, costed alternative. A tenant who can credibly say "we have offered terms on Building X and the economics work" extracts concessions that the passive tenant never sees. This is the leverage value of building the relocation analysis — even if the tenant ultimately renews.
On relocation: the target building's landlord knows whether the tenant is shopping seriously. Buildings with 6+ months of void are negotiable; buildings with competing heads of terms are not. Knowing which is which requires current market presence, not a Rightmove search.
The most valuable single output of the renew-or-move analysis is often the decision itself. It is the leverage it creates over the renewal. Tenants who run this analysis seriously — with current deal data and honest numbers — typically end up with a better renewal deal than tenants who do not, regardless of whether they actually move. The analysis creates the pressure; the pressure creates the concession.
Building this analysis credibly requires current deal data that tenants cannot get from public sources. Published asking rents do not disclose what landlords are actually conceding this quarter. Without that data, the model is theoretical. With it, the model is leverage.
Tenants who start the renew-or-move analysis 24 months before the lease event have more leverage than those who start at 12 months. The timeline below assumes a 2027 lease expiry.
[ Table 4 — paste HTML Embed here ]
Tenants who compress this into 6 months take whatever is offered. Those who run the full 24 months negotiate.
Seven errors appear consistently in tenant-led models.
Comparing headline rents only. Net effective rent — headline rent adjusted for the full incentive package across the lease term — is the only valid comparison. A £68/sq ft building with 24 months rent-free on a 10-year term has a net effective rent of approximately £54.40/sq ft. A £62/sq ft building with 12 months rent-free has a net effective rent of approximately £55.80/sq ft. The lower headline rent is actually the more expensive building.
Treating dilapidations as a surprise. Dilapidations exposure is a known cost line, calculable from the lease and the building's condition, from the first day of occupation. Model it at the start, not when the landlord serves the schedule.
Using a single fit-out cost per sq ft. Published ranges are wide — £45–£250/sq ft for Cat B depending on specification and market — and the spread within each band is further widened by building-specific factors: services condition, access constraints, listed status, procurement route, and programme. Get a building-specific estimate. An average destroys the model.
Modelling on the wrong area basis. IPMS 3, NIA, and GIA produce different numbers. Choose one and apply it consistently. A building quoted at 12,500 sq ft NIA and another at 12,500 sq ft GIA are not comparable.
Forgetting the business rates step-change. A new building with a higher rateable value — say £820,000 versus £620,000 — attracts the same 50.8p high-value multiplier but produces a £100,000/year difference in rates. Over 10 years, that is £1,000,000.
Modelling on landlord-provided assumptions. The landlord's surveyor models on the landlord's preferred assumptions. Build your own model, on your own inputs, independently verified.
Dismissing Option B because you "wouldn't move anyway." Running the relocation analysis is what creates the leverage that improves the renewal. If you dismiss it because the answer feels predetermined, you have given that leverage away for free.
The answer to "should I move office or renew?" is built, not asked. Here is how to start building it.
Once the model is built, the answer is usually clear. And the leverage, in most cases, is automatic.
How much does it cost to move office in the UK?
Total cost of a UK office move — fit-out, dilapidations, relocation, professional fees, and SDLT — typically runs £80–£200/sq ft on a mid-spec Cat B project. The range reflects variation in specification, submarket, and building complexity.
What is the breakeven on an office move?
On a typical 10-year lease, the breakeven (the point where relocating becomes cheaper than renewing) usually falls somewhere between 24 and 48 months from the lease event, depending on the incentive package and one-off capital costs. Inside that window, renewing is almost always cheaper.
Is it cheaper to renew or move office?
In the short term, renewing is almost always cheaper. Whether moving pays back depends on the lease length and the differential between the renewal rent and the alternative's net effective rent after incentives.
How much rent-free can I expect on a 10-year office lease in 2026?
In the City of London, typically 22–24 months on a prime 10-year term certain. West End, 18–24 months. The Big Nine regional cities (Birmingham, Leeds, Manchester), 18–21 months on average per Avison Young's Big Nine Q1 2025 data. All of these vary materially by building, landlord, and covenant strength.
What is a capital contribution on an office lease?
A direct cash payment from landlord to tenant against fit-out costs, typically paid on occupation or in tranches. On prime Central London 10-year deals in 2025–2026, contributions generally range from £40–£100/sq ft. Regional markets offer less.
How much do dilapidations cost on an office exit?
Typically £10–£40/sq ft, sometimes higher where full reinstatement to shell-and-core is required. Capped by Section 18(1) of the Landlord and Tenant Act 1927 at the diminution in value of the reversion — which is often lower than the cost of works and sometimes close to nil where redevelopment supersession applies.
What is the difference between Cat A and Cat B fit-out?
Cat A is the developer's base finish — raised floor, suspended ceiling, basic mechanical and electrical services. Cat B is the tenant's fit-out: partitions, workstations, meeting rooms, kitchen, IT infrastructure, and finishes. Landlord capital contributions apply to Cat B costs.
Does the landlord pay the broker fees on a new lease?
Standard UK market practice is that the landlord pays the letting agent on both sides of a new letting; the tenant's cost is limited to their own tenant-representative surveyor's fee, which is usually contingent on achieved savings. On a renewal, the tenant pays their own adviser's fee.
Can I sublet rather than move?
Subject to the alienation clause in the existing lease, subletting is often available and worth modelling as a third option. A business that has under-utilised space post-hybrid may find that subletting the surplus — rather than moving to a smaller building — produces the best economics of all three scenarios.
What is the 2030 EPC B requirement for commercial offices?
The current legal minimum for non-domestic lettings in England and Wales is EPC E, under the 2015 MEES Regulations. The government's stated trajectory — EPC C at an interim milestone and EPC B by approximately 2030 — is policy intent published in the 2020 Energy White Paper and the 2021 BEIS consultation. The formal government response to that consultation had not been published as of mid-2025. Expect the EPC B deadline to land somewhere between 2030 and 2035, subject to legislation that has not yet been enacted. Renewing in a low-rated building is a risk; it is not yet a legal certainty.
The renew-or-move question is the largest discretionary financial decision most businesses will make this decade. It is also one of the most reliably mis-handled — framed too narrowly, modelled too thinly, started too late, and decided on inputs the tenant has not properly tested.
The discipline is unglamorous. Read the lease. Pull the data. Build the model. Run the sensitivities. Fill the gaps. Tenants who do that work end up with either a better renewal or a better relocation — and frequently both, because the analysis creates the leverage. Tenants who skip it take whatever is offered.
Legislation
- Landlord and Tenant Act 1927, Section 18(1) — the cap on dilapidations damages at the diminution in value of the reversion (legislation.gov.uk).
- Landlord and Tenant Act 1954, Part II — statutory renewal framework governing the Section 25 and Section 26 timetable (legislation.gov.uk).
- The Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 — Minimum Energy Efficiency Standards (MEES); current minimum EPC E for non-domestic lettings.
- HMRC — Stamp Duty Land Tax on leases — NPV calculation methodology and rates for commercial lease transactions.
Case law
- Peachside Limited v Lee & Keung [2024] EWHC 921 (TCC) — the most recent reported decision on both limbs of Section 18(1): where a phased plan of repair-then-redevelop exists, the diminution cap may apply to the repair phase only.
Government data
- VOA — Find and check your business rates valuation — public register of rateable values and multiplier lookup (GOV.UK).
Market data
- Turner & Townsend — Global Office Fit-out Cost Guide 2025 — Cat A and Cat B benchmark costs per sq ft by market.
- Cushman & Wakefield — 2025 UK Fit-out Cost Guide — UK office fit-out cost benchmarks by specification tier.
- Avison Young — Big Nine Office Market Report, Q1 2025 — rent-free period data for the nine largest UK regional office markets.
- Savills — Central London Office Market Watch, Q1–Q3 2025 — rent-free period benchmarks and incentive packages for Central London office leases.
RICS standards
- RICS — Dilapidations Guidance Note, 7th edition — methodology for preparing and responding to dilapidations schedules; Pre-Action Protocol for Dilapidations Claims.
This article reflects publicly available market data, legislation, and case law as at May 2026. Fit-out cost ranges and rent-free benchmarks are subject to deal-specific variation and are refreshed quarterly. Nothing in this article is legal or financial advice on any specific transaction.
Want to find your next leased, managed or serviced office space to rent? Book a call with our team today.
