In 2025, flexible office space leases aren’t just practical – they offer balance sheet clarity that investors increasingly expect, turning lease accounting into a strategic advantage.
IFRS 16, the accounting rule most founders, CFOs, and CEOs ignore, is quietly reshaping how smart businesses raise capital, manage burn, and stay lean. If your team is growing and you’re still signing 3-to-5 year rental agreements or leases, you could be adding hundreds of thousands in liabilities to your books – and sending all the wrong signals to investors who know that things change fast as you grow.
The good news? There’s a smarter way to account for office space. And it’s built into the rules.
What is IFRS 16 – why does it matter in 2025?
IFRS 16 is a global lease accounting standard introduced by the International Accounting Standards Board (IASB) in 2019 and published on the IFRS website. It requires businesses to report most leases as liabilities on their balance sheet – along with a corresponding right-of-use asset. This means traditional long leases (over 12 months) no longer just show up in your P&L. They now appear as actual debt. This may not be ideal for future investors.
Here’s what that means in simple terms:
- Old rules (pre-2019): office rent was usually treated as an expense on your P&L.
- Now (under IFRS 16): that same lease becomes a £300k+ liability on your balance sheet if it’s over 12 months. And yes, investors always see it and probably won’t like it.
- While Flexas highlighted in 2023 that there are a few exemptions, if you’re locked into a 3-year office lease at £10k/month, that’s £360,000+ of liability now sitting on your books.
There are few ways around this and that has consequences:
- It inflates your debt ratios
- It reduces financial flexibility
- It can spook investors during due diligence
But flexible leases of 12 months or less are exempt from this rule – and that’s the opportunity in how you put your books together.
In 2025, this matters more than ever:
- In an AI-led world, investors expect companies to be ultra efficient in ever department
- VCs and strategic buyers are therefore scanning balance sheets aggressively and looking for effective fixed-cost discipline in every part of the business
- Flexible leases (under 12 months) don’t count under IFRS 16 – they’re fully exempt, and will be favoured
- Post COVID, with hybrid work now mainstream, legacy leases with the expectation of full-company office attendance weekly are financial dead weight
Two identical offices. Two very different financial outcomes.
Let’s run a scenario:
Traditional lease
- £10k/month over 3 years
- £360,000 shown as a liability
- Reduced agility, heavier optics, and a growing cost if plans change
Flexible lease
- £10k/month on a rolling 12-month agreement
- Not treated as a lease liability under IFRS 16
- Clean balance sheet, lower fixed commitments, greater flexibility
Same office space. Same cost, but with better terms. And a completely different impact.
That’s why smart founders and CFOs are now thinking differently.
What accountants have to say
“Startups often underestimate how influential their office lease choices are,” according to the founders of Novabook, a startup-focused accountancy firm.
“With IFRS 16, the wrong lease inflates your debt position and can distort KPIs like EBITDA or working capital. Choosing a flexible lease structure isn’t just operationally smart – it can be a strategic financial decision that strengthens your narrative during investment due diligence, and helps build a more flexible investment case for future raises.”
What investors are really looking at in 2025
It’s no longer just about revenue and burn. Investors are scanning:
- Fixed cost discipline – are you locked in to an office lease overhead unnecessarily? And can you get out of it?
- Runway adaptability – can you scale your office space like you scaled your headcount?
- Raising optics – are your liabilities masking true growth and scaling agility?
In fact, recent reporting from CBRE in late 2024 shows that AI-first and VC-backed startups are increasingly favouring short leases or flexible terms to avoid getting penalised during funding rounds. This is a post COVID-era change that is not going anywhere soon and AI is making it an existential transition in the market.
Why IFRS 16 is important now
Hybrid is now standard. AI is shifting team shapes and workflows fast. Legacy leases and heavy future financial commitments belong to a totally different era.
According to Korn Ferry, over 65% of global workers want at least partial remote work, and back-office roles are increasingly automated. Yet many companies are still occupying (and accounting for) office space built for headcounts and org charts that no longer exist. This is crazy.
This isn’t a blip. It’s a structural shift. And flexible workspace is the clear response you should be taking now, and for every office space contract you sign ahead.
What ADAPT sees every day
At ADAPT, we partner with fast-growth companies to not just find offices – but to design workspace strategies that align with how you hire, build, and raise.
As Chris Meredith, ADAPT CEO & Founder, explains: “What looks like a great office space lease on paper can become a serious weight on your balance sheet. IFRS 16 has made lease decisions more visible – and more impactful – than ever. We help companies avoid costly mistakes and stay nimble while they grow, and as they raise.”
We specialise in:
- Exclusive, off-market flexible leases
- Smarter, flexible workspace planning for scale
- Spaces that enhance culture, signal confidence, are right for the moment, but are lean and can grow for the future
Over the last ten years, we’ve helped 100s of start-up, scale-up, and AI-powered growth companies restructure their leases or taken them into flexible contracts, advised CFOs pre-Series A, and enabled startups to tell a better growth story – just by changing their office strategy. And we’re getting better all the time.
Chris Meredith, sums it up: “In today’s market, office workspace is actually a growth lever in itself. It’s no longer a fixed line item. The smartest businesses are using IFRS 16 to their advantage – staying lean, staying flexible on short-term contracts, and unlocking new ways to impress investors without overcommitting.”
What can you do to get ahead of IFRS. 16?
If you’re raising funds this year, or if your headcount has changed, or if you’re sitting on a legacy lease that no longer reflects how your team works – now is the time to act.
Flexible space doesn’t just work better. It shows better.
ADAPT can not only help you find a smarter, more flexible office space (that fits your needs perfectly) but also help set you up with the best possible solution for IFRS 16 and future capital raises. We call it the ADAPT difference. You can start here.
