Negotiate lease incentives to cut costs
Leasing incentives are financial concessions or upfront capital payments that landlords make to prospective tenants to entice them to commit to a binding lease agreement. Typically, these incentives are rent-free periods at the commencement of the lease, cash payments, payments of the tenant’s fit-out costs, or monthly rental reductions for a fixed period.
Lease incentives are generally available under the following circumstances:
- Where a building is new.
- Where a shop has been vacated by a tenant due to receivership.
- When the economic environment is difficult and there is a lot of vacant space.
- Research the lease incentives provided for similar space – this is difficult as leasing incentives are not set out in the lease agreements and are therefore not ‘discoverable’ in a legal search registered lease agreements. They are normally included in an incentive deed which is confidential between the landlord and tenant.
- Negotiate a lease incentive with your proposed landlord – also possible if your current lease is expiring and you wish to sign up for a new lease with your current landlord.
- Consider that contributions to fit-outs usually have conditions attached to them, such as claw-backs, where a tenant does not stay for the full length of the lease.