Alongside another timely update of the existing dataset, the first instalment of the CREDIA Index for 2021 introduces two new metrics: Lease Retention and Void Length.
In the current environment, tenant longevity is at the forefront of many landlord’s minds. This new statistic establishes the rate at which tenants renew or extend their lease when presented with either a term expiry or break option. As landlords need to gauge the likelihood of future vacancies and the impact on cash flow, the Lease Retention metric provides a retrospective view of how similar situations have played out in the recent past.
In December 2020, when faced with an opportunity to leave their premises through a term expiry or break option, 19.8% (United Kingdom), 28.4% (Australia), and 26.9% (New Zealand) of tenants stayed on.
Empty premises not only represent a loss in revenue but often mean that landlords are forced to pick up the tab for business rates and other costs associated with the management of the property. The longer the length of a vacancy or void area, the greater financial consequence for landlords. The new Void Length metric adds colour to the average period of time that vacant areas have been untenanted.
In December 2020, the CREDIA Index indicates that the average number of days that a vacancy lasts is 464 (United Kingdom), 344 (Australia), 400 (New Zealand).
The CREDIA Index provides a timely and relevant insight into the commercial real estate market. To further instil its relevance, we always welcome input from readers. If you have any thoughts on future metrics which would better assist in your analysis of the evolving CRE space, feel free to reach out to our team.