For the first time in 10 years, some of the frenetic feel of the late 1980s is back in the property market. Chartered surveyors' circulars regularly report declining vacancy levels, rising demand and almost no new supply. This sounds like the formula for a return to the property investor's dream leasehold. That means properties let for 25 years without break clauses; upward-only rent reviews every five years; and tenants bearing the full cost of repairing and insuring the properties.

In short, this provides a long-term, low-risk deal for the landlord, but a punitive arrangement for tenants. The UK's historical imbalance of supply and demand has given commercial property owners the whip hand in letting arrangements.

There are few reasons to believe the present cycle should be different. However, the latest research from Drivers Jonas, the chartered surveyors, reveals some startling facts. After an analysis of 4,713 leases granted in 1996 and recorded in the Investment Property Databank, the survey finds that 55 per cent were granted for five years or less.

Moreover, leases in central London, where property values have risen most, tend to be slightly shorter than elsewhere. And the average length of new leases for all properties in 1996 was eight years, down from nine years in 1993 and 20 years in 1989.

These data raise the question about whether there has been a fundamental shift in the landlord-tenant relationship in commercial property. Malcolm Hull, a partner at Drivers Jonas, believes there has. The severity of the recession in the early 1990s allowed tenants for the first time to begin dictating lease terms. It also forced companies to rethink their own corporate strategies, prompting a change in their space requirements, he says. Companies are outsourcing functions they no longer regard as core, and there has been an increase in socalled hot-desking and working from home.

"Companies are now working on fixed-term contracts," Mr Hull says. "You may find a company which has signed a five-year contract to be a distributor for, say, Tesco. They do not want a contract for more than five or 10 years."

As a result, there is significant rethinking about property on the demand side. A decade ago, Mr Hull points out, almost all tenants were kitted out with the same lease, regardless of need. "Everyone used to be shoehorned into 25-year leases, even small businesses needing only 2,000 square feet of office space," he notes. "Nobody plans on being a small business for 25 years."

The lack of flexibility in lease arrangements was particularly tough for smaller businesses, and potentially disastrous for start-ups, says Sir Ronald Norman, chairman of the Teesside Development Agency.

In the early 1990s, the agency had to guarantee long-term leases on behalf of small businesses before landlords would rent them premises. When it needed to re-let those premises, the agency was able to do so with very few left vacant. "The presumed risk with short-term leases was exaggerated," says Sir Ronald.

There is also some rethinking about property on the supply side. A handful of property developers is waking up to its potential as a financial asset from which greater returns may be extracted in exchange for taking on greater risk. If short-term leases are riskier, price them that way. Keith Egerton, managing director of Taylor Woodrow Property, says the company redeveloped a site at Cadogan Square in Glasgow with five-year leases in mind. Among other things, Taylor Woodrow had discovered a predilection among companies to site their tele-marketing activities in Glasgow, a business with little demand for long-term space.

Rather than redeveloping the site, the company refurbished it at a much lower cost and is achieving rent levels about two-thirds of those in ultra-modern office space nearby. "We see a market for short-term leaseholds," says Mr Egerton.

Traditional 25-year leases passed almost all the risk to the tenant, leaving property companies to collect the rewards, says Peter Freeman, joint chief executive at Argent Group, the UK property developer. A new approach is needed, he says.

"We are not looking for a fixed return on our money," he told a group of corporate tenants recently. "Rather, we want an attractive return on money invested relative to the risk, time and effort of a particular transaction."

Thus, Argent is prepared to offer short-term leases to clients, or leases with early break clauses, provided the client is prepared to pay for them. He suggests a 20-year lease with a break option that can be exercised at any time on 12 months' notice, provided the tenant pays a penalty of four years' rent. Mr Freeman believes tenants are willing to agree to such heavy penalties. He cites the case of three recent Argent clients who paid penalties equal to six years' total rent to extract themselves from their leases.

The Drivers Jonas research suggests this risk-reward approach to lease pricing has yet to filter into mainstream use. The study found a strong correlation between higher rents and longer leases. When lease terms are weighted by rental value, the average new lease in 1996 is 15 years, not the eight-year average when measured numerically. Leases for terms of more than 20 years - that is, those with the least risk for the landlord - are the ones that tenants are paying most for.

Nevertheless, the research shows newer leases have a greater incidence of early break clauses, regardless of the lease value.

"There is likely to be increasing pressure for more risks to be transferred away from occupiers," Mr Hull notes. Those who fail to rise to the challenge are likely to have a tough time.