Office Space Guide
A Practical Guide to Leasing an Office Space
By Jules Robertson, Tally Workspace · Published 8th April 2026
A commercial office lease is a legal agreement between a tenant and a landlord granting use of office space for a fixed term. It is the oldest and most committed way to take an office - and for decades it was the default.
It is no longer the default for most growing companies. Roughly 30% of the companies who come to us asking about a lease end up signing a managed or serviced agreement instead, once they've seen the all-in numbers. This guide explains how commercial leases work, what they actually cost, and the specific situations where a lease beats managed or serviced.
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View →What is a commercial office lease?
A commercial office lease is a contract that gives a tenant the right to occupy and use a piece of office space for an agreed period, in exchange for rent and the obligations set out in the lease document. Unlike a licence, which is a personal permission to use space, a lease creates a legal interest in the property. That affects your tax treatment, your break rights, your ability to sublet, your accounting, and your exposure at the end of the term.
On the day you sign a lease, you are not just agreeing to pay rent. You are agreeing to:
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Fit out the space yourself, or take it in whatever condition you have agreed with the landlord
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Pay business rates directly to the local council
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Pay a service charge for shared building services (usually quarterly, often variable)
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Maintain and repair the space during the term
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Return the space to an agreed condition at the end of the term (dilapidations)
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Insure your contents and, in some cases, contribute to buildings insurance
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Comply with the alienation clauses, which control whether you can sublet or assign
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Pay the landlord's legal fees, in many cases
None of that is included in the headline rent. This is the first thing most people get wrong about leasing, and it is the reason a lot of companies who think a lease is cheaper end up paying more than they would have on a managed or serviced equivalent.
What's included in a leased office (and what isn't)
In a traditional lease, almost nothing is included. You pay for the rented floor area, and everything else is your responsibility. Items you typically pay for separately on top of the rent:
Rent
The headline £/sq ft figure, payable quarterly in advance.
Business rates
Set by the VOA, paid to the local council, variable by building and postcode.
Service charge
Paid to the landlord or managing agent, covers shared building costs, typically variable.
Utilities
Electricity, gas, water, payable separately to the supplier.
Fit-out
The cost of making the space usable.
Furniture
Can be provided by the landlord.
IT and ongoing IT support
Rarely included in the rent.
Cleaning and waste
Separate contract.
Insurance
Buildings contribution plus contents.
Legal fees
At the start of the lease.
Reinstatement and dilapidations
The end-of-term liability, usually amortised.
The per-square-foot headline rent is not the cost of the office. It is the cost of the floor. The cost of the office is the rent plus the rates plus the service charge plus the fit-out amortised over the term plus the utilities plus the cleaning plus the repairs. Once you add it all up, the all-in £/desk/month can be very different from the list price, and it is almost always higher than people expect.
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How a commercial office lease works: contract structure, length, and break clauses
This is the section most guides skip or soften, because most guides are written by people with a horse in the race. Here is what you need to know.
Lease vs licence
A lease creates a legal estate in the property. A licence is a personal permission to use space. The difference matters: leases can only be ended on the terms written into them, give you full control over the space, carry the repairing obligation and dilapidations exposure, and are reportable on your balance sheet under IFRS 16. Licences typically do not.
If you want control and are happy to take on the obligations, a lease is the right instrument. If you want flexibility and want someone else to handle the building, a licence (managed or serviced) is usually the better fit.
Typical lease length
UK commercial office leases used to be five years as standard, with a tenant break at three. Post-COVID, that has compressed. Many landlords will now accept two to three year terms. If you are a 15 to 60 person team looking at London floors below 5,000 sq ft, a two or three year term is increasingly negotiable. Ask for it.
Repairing obligations and dilapidations
At the end of the lease, the landlord will commission a dilapidations schedule - a list of every item in the space that needs to be repaired, replaced, or reinstated. This can be significant. Negotiate a "schedule of condition" at the start (photographs and notes of the state of the space on day one) to cap your exposure to the original condition, not the landlord's idealised version of it.
Break clauses
A break clause is a contractual right for the tenant, the landlord, or both, to end the lease early on a specified date. In practice, you want a tenant-only break as early as you can get it, on as few conditions as possible. Watch for:
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Break penalty. Some landlords want a cash payment on exercise. Negotiate it down or out.
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Break conditions. "Full vacant possession", "all rent paid up to date", "repairing obligations fulfilled". Each one is a trap. Tenants have lost break rights because a single invoice was paid late.
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Notice period. Typically six or twelve months. Longer is worse for you.
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Rolling vs fixed. A rolling break after year two is better than a single fixed break date.
Alienation (subletting and assignment)
Alienation clauses control whether you can sublet the space or assign the lease to another company. If your business grows and you outgrow the space, or shrinks and needs to exit, these clauses decide how easy that is. A well-drafted alienation clause is the difference between a clean exit and a twelve-month negotiation with your landlord.
Rent reviews
On longer leases, a rent review clause lets the landlord reset the rent at specified intervals, usually every five years. The review is almost always upward-only. On shorter leases, rent reviews are rare. On anything five years or longer, negotiate the review mechanism carefully.
The negotiation playbook
These are the levers Tally Workspace uses on commercial leases. Not all of them apply to every deal.
Reduced rent. A reduction in the headline rent. This can also be a stepped deal and change each month.
Rent-free period. A month or more of rent-free at the start of the lease and again after the break clause. Often the easiest concession and the most valuable.
Cap on service charge. A contractual ceiling on annual service charge increases. Protects you from open-ended liability on a cost you do not control.
Capped dilapidations. A pre-agreed cap on the end-of-term dilapidations cost, or a schedule of condition that limits exposure to the starting state of the space.
Fit-out contribution. A cash contribution from the landlord toward your fit-out costs, sometimes called a 'capital contribution'. More common on longer terms and shell-and-core spaces.
Tenant-only break, rolling. A tenant break right that can be exercised on any quarter date after a minimum period, rather than a single fixed date.
Reduced break conditions. Strip the 'all rent paid', 'vacant possession' and other conditions down to the minimum the landlord will accept. Most landlords will give up at least one.
Reduced notice period on break. Six months instead of twelve.
Landlord-paid legals. The landlord pays their own legal fees instead of charging them back to you. Worth £5,000 to £15,000 on a typical mid-market deal.
If a broker or landlord tells you none of these are negotiable, ask why. Most of the time, the answer is "we haven't bothered to ask".
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How much does it cost to lease office space?
The headline rent is not the cost. The cost is the total cost of occupancy (TCO), and on a London lease it is almost always 40 to 70% higher than the rent figure on the agent's particulars.
Indicative London cost ranges (2026)
| Submarket | Rent (£/sq ft) | Service charge (£/sq ft) | Business rates (£/sq ft) | All-in (£/sq ft/year) | Fit-out (£/sq ft, one-off) |
|---|---|---|---|---|---|
| City | £94 | £21 | £28 | £143 | £40 – £120 |
| Midtown | £91 | £12 | £25 | £128 | £40 – £120 |
| West End | £144 | £29 | £59 | £232 | £40 – £120 |
| Shoreditch | £66 | £11 | £19 | £96 | £40 – £120 |
| Southwark | £82 | £17 | £18 | £117 | £40 – £120 |
Upfront costs before you move in
Deposit. Usually 6 to 12 months of rent, held by the landlord for the duration of the lease. If you pass the three-year profits test you may not have to pay a deposit.
Legal fees. Budget £8,000 to £20,000 for a straightforward mid-market deal.
Fit-out. Anything from £40 to £120 per sq ft depending on the standard you want and the shell condition.
Furniture, IT, and day-one setup. £1,500 to £3,500 per desk. Will vary depending on your requirements.
The average upfront cost of a 30-person, 3,000 sq ft office in Central London could be in excess of £150,000. The equivalent 24-month managed agreement for the same team requires roughly £50,000 upfront. Longer term, the lease will commonly be cheaper - but there is a significant upfront cost and organisational burden.
When leasing makes sense (and when it doesn't)
The honest answer is that a traditional lease is the right instrument in a narrower set of situations than most people think.
When a lease is the right answer
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You are committing to a single location for at least five years, and you know it. Not "we think we will stay", but a board decision with a business reason behind it.
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You need full control of the space - to rip out walls, install specialist equipment, build a studio, run a lab, brand the building, put up your logo at the front.
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You have the budget and the people to run a building. Fit-out capital, facilities management headcount, the admin to handle rates, service charge, insurance, repairs, and dilapidations.
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You want long-term cost predictability. On a ten-year lease in a stable market, you can model your occupancy cost per desk with reasonable confidence.
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Your team size is stable and predictable. 100+ people, low headcount volatility, a clear view of where you'll be in three years.
When a lease is the wrong answer
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Your team is 15 to 60 and expecting to grow or change. The lease you sign today will not fit the company you are in eighteen months.
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You do not want to spend three to six months on fit-out before move-in. A lease move-in timeline is rarely under three months. Managed is typically four to eight weeks. Serviced is days.
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Your timeline is uncertain. If a fundraise, merger, or expansion is on the table, a five-year commitment is the wrong instrument.
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You do not have in-house facilities management. Running a building is work. If you do not have someone whose job it is, you will either spend unbudgeted consultant fees or things will slip.
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You cannot afford to tie up capital in a deposit and fit-out. Deposit money is dead money for the length of the lease.
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You are looking at less than 4,000 sq ft. Below that, the fit-out cost per desk becomes painful and the landlord's willingness to offer a serious deal drops.
Pros of leasing
- · Full control of the space
- · Long-term cost predictability
- · Freedom to customise, brand, and invest in the fit-out
- · Asset value (leases can occasionally be assigned at a profit in strong markets)
Cons of leasing
- · High upfront cost
- · Long fit-out and move-in timeline
- · Repairing liability and dilapidations exposure
- · Hard to exit early, expensive to break
- · Headline rent is not the total cost
- · You take on the facilities management job
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When a lease beats a managed or serviced space
A traditional office lease still makes sense in specific situations. Here is how it compares to managed and serviced.
| Feature | Managed | Serviced | Leased |
|---|---|---|---|
| Contract type | Licence (often longer) | Licence | Lease |
| Typical term length | 18 to 36 months | 1 to 12 months | 3 to 10 years |
| Fit-out and furniture | Included, customised to your brand | Included, standard | Your responsibility, capital cost |
| IT and broadband | Included | Included | Your responsibility |
| Cleaning and utilities | Included | Included | Your responsibility |
| Reception and meeting rooms | Often dedicated, included | Shared, included or credit-based | Your responsibility |
| Customisation and branding | Significant | Limited | Full |
| Upfront cost | Low to moderate | Low (deposit only) | High (fit-out, deposit, fees) |
| Ongoing cost predictability | High (one bill) | Very high (one bill) | Moderate (multiple bills, variables) |
| Best for | Teams who want a branded space without the admin | Teams who need speed and flexibility | Teams with long-term certainty and capital |
A lease is the right choice when you are committed to a single location for at least five years, you have the budget and people to run a building, and you want full control over the space. For most other scenarios, a managed office space or a serviced office option will get you there faster, cheaper, and with less risk. Most companies who come to us asking about a traditional lease end up in a managed or serviced space instead, once they've seen the numbers. If you want to see what is currently available, browse offices in London or talk to an adviser.
Glossary of lease terms
Eight terms you will see in any commercial lease. Plain English.
- Alienation
- The clauses that control whether you can sublet or assign the lease to someone else. Matters if you grow, shrink, or need to exit.
- Assignment
- Transferring your lease to a new tenant. Usually requires the landlord's consent.
- Break clause
- A contractual right for the tenant, the landlord, or both, to end the lease early on a specified date, subject to any conditions in the clause.
- Dilapidations
- The cost of returning the space to an agreed condition at the end of the lease. The single biggest hidden liability in most commercial leases.
- Heads of terms
- The non-binding summary of the commercial terms agreed between landlord and tenant before the formal lease is drafted. Where most of the negotiation happens.
- Rent review
- The clause that allows the landlord to reset the rent during the term, usually every five years, usually upward-only.
- Schedule of condition
- A photographic and written record of the space at the start of the lease, attached to the lease document, used to cap dilapidations exposure to the starting state.
- Service charge
- A variable payment to the landlord or managing agent for shared building services. Often unpredictable. Negotiate a cap.
Frequently asked questions
What is a traditional office lease?
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How long are commercial office leases in the UK?
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What are the upfront costs of leasing an office?
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When does leasing make more sense than a serviced or managed office?
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What is a break clause?
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Case study
Butternut Box
When Butternut Box came to us, they were growing fast and ready to create a branded HQ of their own. They needed 12,000–15,000 sq ft in London, in a space to call their own - and it needed to be dog friendly with grass nearby for the dogs to play.
A lease was the right answer - not a managed space, not serviced. They were committed to the location, they wanted to brand the space, and they had the team to run a building. We ran the search, negotiated the deal, and got them a great outcome. We even sourced a fit-out company to make their dream space a reality.
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