Property disposals can unlock capital and reduce liabilities for businesses.
The UK commercial property market is experiencing a significant increase in asset disposals due to investor redemptions.
Flexible office space demand remains strong despite an influx of properties hitting the market.
Property disposals can unlock capital, reduce liabilities, and streamline operations — when approached strategically. But in today’s turbulent commercial property market, knowing how and when to dispose of property has become more complex than ever. Whether you're reassessing your office footprint, rebalancing investment portfolios, or adjusting to a hybrid work strategy, this guide will help you understand the key aspects of property disposals from both a legal and practical standpoint.
What are property disposals?
A property disposal refers to the sale, lease surrender, or other form of divestment of a commercial property. Businesses may choose to dispose of property for a range of reasons — relocating to more flexible space, unlocking capital for reinvestment, or offloading underutilised assets.
For commercial occupiers, this may include:
Selling a freehold interest
Assigning or subletting a lease
Surrendering a lease early
Disposing of part of a property portfolio
For property investors and funds, disposals are part of an ongoing asset management strategy. But for occupiers, disposals are often a key part of operational change — such as switching to flexible office space or downsizing due to hybrid working.
The rise in commercial property disposals
Over £1bn in UK commercial property assets are currently being sold off by major funds — including Legal & General, BlackRock, M&G, and Columbia Threadneedle. Why? Interest rate hikes have triggered a sharp increase in investor redemptions. These property funds typically hold physical real estate and only a small buffer of cash. When large numbers of investors pull out at once, the only way to meet demand is to sell assets — and fast.
To avoid fire sales, many funds are now restricting withdrawals. A spokesperson from Columbia Threadneedle Investments explained:
“We have introduced deferred redemptions on the Threadneedle Pensions Property Fund due to liquidity constraints resulting from the recent market volatility and a subsequent increase in redemption requests... We aim to return the fund to daily dealing as soon as possible.”
The effect? A rush of assets hitting the market. And according to Goldman Sachs, UK commercial property values could fall by up to 20% between June 2022 and the end of 2024.
Will this reduce flexible office costs?
You’d think more supply equals lower prices — but the reality’s a bit more complicated.
Yes, there’s more commercial space available. But high-quality flexible office space is still in demand. Companies are leasing less space overall, but they’re more selective. If they want people back in the office, that space has to feel worth it.
Across the board, landlords and operators are reporting a split market:
Premium flex space continues to move quickly and at a premium
Older, less modern buildings are struggling — and offering incentives
Hybrid-ready, sustainable spaces are leading the way in future-proofing
So while some companies are expecting huge discounts when negotiating their next flexible office contract, it depends on what they’re after. If your team is happy with something more basic, there are great deals to be had. But if you’re looking for a five-star office in a prime location? Prices are holding steady — or even increasing.
Why haven’t flexible office prices dropped?
Most operators are still working with historic lease agreements and long-term energy deals. So even with market volatility, their costs haven’t dropped significantly — and they don’t have savings to pass on.
But that could change.
As new agreements are signed and old ones expire, we may see prices become more dynamic. Operators also want to maintain high occupancy rates and avoid costly voids, which means negotiation is still possible — especially if you know where to look.
What is the 36 month rule?
The 36 month rule is a key Capital Gains Tax (CGT) relief for property disposals in the UK. It allows sellers to treat the last 36 months of ownership as if the property were still their main business premises, even if it wasn’t actively used during that time.
This relief is especially useful for businesses that have moved out or vacated a property but haven’t yet sold it. It can significantly reduce CGT liability, depending on how the disposal is structured.
Do you pay tax on disposal of assets?
Yes. Most property disposals involve a tax liability. For UK businesses, the key taxes include:
Corporation Tax on chargeable gains (if the company owns the property)
Capital Gains Tax (for individual or partnership owners)
VAT (if applicable on the property or if opted to tax)
Stamp Duty Land Tax (SDLT) on leases surrendered for consideration
If the property is held as an investment, profits on disposal are treated differently than if it is owner-occupied. Tax planning is essential before any disposal takes place.
For operational teams, property disposals often coincide with a shift in workspace strategy. That might involve:
Moving from a long lease to a flexible licence
Downsizing into shared workspace
Exiting a traditional lease due to cost pressures or remote work trends
In these situations, timing is everything. You’ll need to consider dilapidations, exit clauses, lease break conditions, and whether you’re responsible for reinstatement or making good.
The impact on flexible workspace pricing
Despite an influx of properties hitting the market, we’re not seeing broad-based price reductions in the flexible workspace sector — at least not yet. Operators are still holding historic lease agreements and energy deals, which means many are maintaining stable pricing to remain competitive.
What we are seeing is price divergence:
Premium flex space in prime areas continues to command strong rates
Secondary locations and older stock are seeing greater negotiation and incentives
Hybrid-ready buildings with sustainable design are attracting forward-thinking tenants
According to The Instant Group, the demand for top-tier space could soon outstrip supply — driving costs higher in the long term.
Office disposals and the shift to hybrid work
Many businesses are disposing of space that no longer fits how their teams work. With more teams adopting hybrid models, traditional full-time offices are no longer a default requirement. Companies are adopting more agile solutions — such as rotating desks, flexible meeting room access, and hub-and-roam working patterns.
This shift makes legacy leases feel restrictive. Disposals free up budget and provide flexibility to invest in more suitable solutions.
Key considerations when planning a disposal
Before disposing of a commercial property, you should:
Review your lease: Check break clauses, subletting rights, and any notice periods.
Understand tax exposure: Model CGT or corporation tax liabilities in advance.
Assess your reinstatement obligations: Budget for any dilapidations costs.
Appraise market conditions: Engage a commercial agent to value the space accurately.
Identify your next move: Consider how your team will work going forward.
Strategic property disposals create room for smarter growth
Disposing of commercial property is a strategic move that can redefine the way your business operates. Whether you're releasing capital, transitioning to flexible space, or adapting to hybrid working, now is the time to reassess what your property is doing for you.
At Tally Workspace, we help businesses make informed choices about office space. If you’re considering a move, our team can identify the best opportunities available — whether that’s a fully-managed flexible workspace, a shared office, or a short-term project base.
We’ve got eyes on over 5,000 workspaces — so we can spot the hidden gems, assess your current deal, and help you compare what’s out there.
Laura Beales is the Co-Founder of Tally Workspace, bringing a unique blend of financial expertise and real estate knowledge to the office space industry. A qualified Chartered Accountant, Laura began her career in finance but transitioned into commercial property after experiencing first-hand the inefficiencies and lack of transparency in the market from a customer perspective.
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