Agents bemoan ‘crazy’ delays as deal times drag

Some commercial real estate agents who would normally be found talking up their market are starting to admit that dealmaking is the toughest they can remember for years. They point to problems including archaic lease patterns and processes, increasingly savvy and selective tenants and cross-sector caution around the economy, all of which are dragging out signing off leasing deals. Oli Cohen, a partner at Belcor who refers to himself as “Mr Shoreditch”, published a social media post in which he said: “In my 10-plus years I can’t remember deals ever being so difficult to get over the line,” asking: “Are other agents finding the same?” The LinkedIn post has since gained close to 100 reactions, with many of Cohen’s peers weighing in and agreeing with the City fringe agent. EG caught up with Cohen and others to talk about the issues. Cohen told EG one of the big problems for landlords and agents looking for office tenants is that they can rarely move with the speed of “a WeWork or a Fora” with a managed offering. “If the traditional leasing world doesn’t find a faster-track process, it is going to keep falling behind to managed solutions, because everyone wants ease and convenience now – they don’t want to spend three months going through a painful legal process just to get into an office,” said Cohen. Drawn-out legal processes and leases since Covid are Cohen’s bugbear, but he added that the lack of speed in transactions is due to “a multitude of reasons”. Also on that list is the fact that supply of stock means it is a tenants’ market – and those tenants are “overly cautious”. With tenants “spending more time thinking and scouring the market” and “not 100% committing”, deal times are dragging. “Tenants are nervous,” Cohen said. “They have been more risk-averse than ever because of the wider climate, and that is making these deals so hard to get anywhere. What you have as a result is the tenant being offered other spaces, even when they are under offer, and they are still being pushed by their [current] landlords to stay.” Burnt fingers Cohen’s post had agents chiming in with similar stories, including Harrison Eagles, associate partner and head of commercial agency at LDG, who commented: “I have a retail deal which was under offer in March 2022 and it still hasn’t completed…this week? Please…” David Brooks, senior partner at Retail Group London, replied: “Snap! Feel your pain. Lots of pipeline but three-four-month deals are now taking six to eight months. Crazy…” Some see landlords who shy away from investing in their space as a problem. Roni Rosenberg, director at Richard Susskind & Co, told EG: “There are a lot of landlords out there that won’t speculatively spend the money on their properties, and the agents are expected to still deliver results and tell potential occupiers ‘this is what it is at the moment but if you’re willing to commit to a lease, the landlord will invest in the space and get it to the right standard’. “That just doesn’t sell it anymore. It might have done pre-Covid, but now there is so much stock out there at such a high quality that the next space [occupiers] go to see is probably going to have already ticked that box.” Landlords can be forgiven for some reticence, said Jake Bernstone, founder and director of Stonebrook London. Many private players “had their fingers burnt by turbulence in the pandemic” with non-payment of rents, he said, and this, paired with sector-specific “restructurings”, particularly in the hospitality space, is “throwing up a non-commercial outlook towards dealmaking”, he said. The former JLL retail and leisure specialist added that the approach of public landlords and the estates in initiating leases is also making it trickier to seal deals. On a large restaurant or retail deal, he said, the heads of terms document alone can now be a dozen pages long. “Lawyers are stepping into a minefield with how convoluted these leases and terms have become,” he added. “It’s creating this really vicious cycle where it’s incredibly time-consuming and the majority of the risk is falling with a tenant rather than the landlord.” Outside the bubble Thomas Rose, co-founder of P-Three, said: “People are crossing the t’s and dotting the i’s more than ever before, because every transaction matters that much more in what is a more challenging macroeconomic climate.” Issues stemming from the war in Ukraine, rising energy prices, the cost-of-living crisis and overall economic uncertainty are all stretching out deal time frames, added Rose, who suggested the issues are more nuanced than a social media post can depict. “Sometimes we have to get out of our little property bubble and actually understand the wider implications of all of the markets on the speed of transactions,” he said. “Despite some positive tailwinds, people are going to be nervous about spending money in any transaction, whether it be office or retail, until they are absolutely confident.” But “not every deal takes a long time”, and transactions can still be wrapped up quickly, Rose said. “We just did a deal that took six weeks to finish, which wasn’t too bad. Other deals have been in legal for over a year. But those deals are, for various reasons, incredibly complex. It’s taking longer, but I don’t think it’s necessarily anybody’s fault.” For Rose, “it’s more detail, more due diligence and a little bit of caution”, behind the slowdown, with tenants interrogating service charges and sustainability features prior to committing to a lease. Responsibility for course correcting falls, partly, on agents’ shoulders. “We as agents and advisers need to get better at making sure everything is lined up,” Rose said. “Often things that delay transactions are the most obvious things that people just haven’t got, whether it be anything from a confirmation of a planning consent to proof of funds from a purchaser.” To send feedback, e-mail chante.bohitige@eg.co.uk or tweet @bohitige See which agents have done the most deals so far this year >> Photo from Pixabay