King Sturge's lease consultancy team says tenants are still in the driving seat in 2011 and urges them to look at renegotiating lease terms to create a win win situation for both themselves and the landlord.

"In the past," says Andrew Crampton, King Sturge Birmingham's lease consultancy partner, "Landlords have been able to look forward to increased rental or capital growth, but whilst rents in central London are predicted to rise, across the rest of the UK office rents are unlikely to increase and in some markets they will fall further.  

"The anticipated total returns for 2011 are 6 per cent, made up primarily of income return with capital values static. In 2010, total returns reached 14.5 per cent with offices being the best performer," continues Andrew.

"For the foreseeable future, landlords need to look at other ways to maintain or increase capital values and renegotiating leases will play a strong role in 2011. For a landlord, the longer they can secure income from leases, the more likely they are to see growth in capital values."

For tenants, reducing costs is still of primary concern and where an occupier feels able to commit to its premises beyond the date of a break or a lease renewal, both the landlord and tenant can extract value from lease re-negotiation.

"We recently acted on behalf of a manufacturer in Birmingham," adds Andrew, "Which held a lease with five years until expiry. The lease was extended by a further five years in exchange for a rent free period of nine months.  The landlord's asset value was enhanced due to the increased security of income and the tenant's costs were reduced.

"So whilst some market factors have changed for 2011, the fundamentals remain. Landlords still seek to maintain income and tenants seek to cut costs which means there are still opportunities for both parties to renegotiate lease terms."