Head of property at BT Alan White said that a single currency will make occupation costs comparable across Europe, which will lead to pressure from multinationals for similar uniform leasing structures.
‘I would not be too impressed with a 15-year lease when everyone around me had leases of eight years or less,’ he told a Nabarro Nathanson conference.
He also warned that the European Commission could make a move. ‘If we continue with our much longer leases, there’s every chance that Brussels will step in and try to reduce them,’ said White.
Meanwhile, REIT Asset Management, run by Kevin McGrath, this week wrote to its major UK tenants offering the chance of paying rent in euros.
Most of REIT Asset Management’s tenants on its £150m European portfolio already pay rent in euros. And REIT is also looking for opportunities to invest in sale and leaseback deals in euros.
McGrath said that he is looking into the possibility of raising debt in euros because European interest rates are lower than the UK.
According to new research by Fletcher King and solicitor Radcliffes, landlords cannot compel tenants to pay in euros. Member states already signed up to the euro are covered by a specific European provision which protects parties accepting or paying in euros for three years. The UK is not covered by this provision, but as sterling is legal tender, parties cannot be obliged to pay in euros.
Patricia Godfrey, head of Nabarro Nathanson’s single currency group, said that the euro will remove the risks of investors hedging against currency fluctuations.
She added that the euro would make investors focus on tenant quality and market fundamentals, rather than how they would deal with individual currency risks.