October 2016 :: Latest News
Incentives offered by Developers
Incentives in the industrial property market are on the increase.
Given the current conditions, incentives in the industrial property market are on the increase.
The largest incentives are generally for prelease developments followed by existing speculative developments, then existing buildings and lastly landlords offering current tenants incentives to sign a new lease.
While it can be difficult to determine the value of incentives being offered, net incentives for newer developments can be in the range of 25% to 30%. Many factors can influence the type and value of incentive being offered. Of course, when demand exceeds supply it can mean that no incentive is offered in some cases.
Typically, incentives can take the form of rent-free periods often at the start of the lease. However, cash rebates, or even specialised capital works to suit a tenant’s needs are all types of incentives offered by landlords. The type of incentive offered will depend on what incentive best suits the tenant and the ability of developers to be flexible.
Institutional owners of larger properties — say 5,000 sqm building size and greater — offer warehouse/factory/office space based on more competitive incentive packages. For example, some organisations offer between 18-24 months on a five-year lease for new buildings.
Other unique lease ideas can be structured to suit the particular needs of tenants.
Compressing yields will allow further incentives to be offered to prospective tenants in the right situations.
