October 2016 :: Market Updates
Increasing Incentives Mean Good News for Tenants
Incentives in the Industrial Property market are on the increase.
Incentives in the industrial property market are on the increase. Let’s look at a few of these and what they mean for tenants.
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 is often difficult to determine the financial value of incentives, net incentives can be in the 25% to 30% range for newer developments.
Many factors come into play for the incentive being offered. Obviously, in cases where the demand outstrips the supply, no incentives are offered.
Incentives typically 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 other types of incentives offered by landlords. The type of incentive offered depends on which particular incentive best suits the tenant and how flexible developers can be.
Institutional owners of larger properties — for example, 5,000sqm building sizes and greater — often offer warehouse/factory/office space based on more competitive incentive packages. Some organisations are offering between 18 and 24 months on a five-year lease for new buildings.
Other unique lease ideas can be structured to suit the individual needs of each tenant.
Decreasing yields in industrial property will result in further incentives being offered to prospective tenants in the right situations.
