Incentives are a crucial component of getting the best deal on your office lease.
In this article, we’ll explain the concept of incentives in commercial leasing. These incentives are bonuses or discounts offered by landlords to tenants as part of lease negotiations. Let’s dive into the details.
What are incentives?
Incentives, also known as tenant’s or landlord’s incentives, are special offers provided by landlords to tenants when they sign a lease for their property. These incentives serve as a bonus or discount for the tenant.
Why are incentives offered?
Landlords offer incentives to attract and retain tenants, thus minimising vacancies and ensuring a steady income from their properties.In times when there is a high vacancy rate and finding good tenants becomes challenging, landlords often increase the incentives they offer to make their properties more appealing.
Incentives benefit both tenants and landlords. Tenants receive a discount on their property costs, while landlords secure tenants and maintain a consistent cash flow.
What types of incentives are available?
Incentives are typically offered in 3 ways:
Rent-free period: Landlords may provide a period of time, usually starting from the lease commencement date, during which the tenant is not required to pay rent.
This allows the tenant to set up their business and get things running without the immediate financial burden of rent. However, tenants usually remain responsible for other building-related expenses like cleaning, electricity, water, and parking.
Rental rebate: Landlords may offer a discount on the rent over the entire lease term. This can be given as a percentage of the total lease value or as a cash contribution that lowers the monthly rent.
Fit-out contribution: Institutional landlords, who generally have more financial resources, may contribute to the cost of fitting out the premises to suit the tenant’s needs. This helps reduce the upfront expenses for the tenant, which can be significant.
Depending on the landlord’s financial situation, vacancies, and market conditions, they may combine different types of incentives to make the offer more enticing.
In summary, incentives are special bonuses or discounts offered by landlords to tenants during lease negotiations. They are designed to attract or retain tenants and benefit both parties involved. These incentives can include rent-free periods, rental discounts, or contributions to fit-out costs, depending on the landlord’s circumstances.
Let us help you
At the moment it’s a tenant’s market and high incentives are being offered for commercial property across Australia. If you’re renewing your lease or relocating, please contact us to find out how we can help you maximise your incentive and minimise your rent.
