The market norm when acquiring leasehold premises is for the landlord to grant an incentive package as part of an inducement to lure a tenant to their building. The following items, although not exclusive, may form part of this:
1. Rent Free Period
This is a common inducement awarded to new tenants when taking a lease.
The length of the rent free will depend on a number of factors to include, lease length, tenant covenant strength, market conditions and specifics relating to the building.
At the time of writing, typical rent free periods for City/North City fringe are in the order of 12 months’ rent free on a 5 year commitment.
2. Carpet Allowance
A typical allowance will be £25 per sq m, in most cases the landlord will cover VAT as well.
This is typically payable upon completion of the lease.
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3. Floor Box Allowance
A typical allowance will be provided to the amount of £75psf per box on a ratio of 1 floor box per 10sqm.
Again the landlord may looking to cover VAT on this with the sum payable upon completion of the lease.
4. Cash Incentive
Some landlords may look to convert part or all of the rent free package into a capital payment to help a tenant with their fit-out.
The landlords willingness to do this will depend on a) their desire to let the space, b) market conditions at the time, c) the covenant strength of the proposed tenant.
5. Turn-Key Fit Out
In certain instances a landlord may undertake part or all of the fit-out on behalf of the tenant in lieu of rent free.
The landlords willingness to do this will reflect similar parameters as to the cash incentive.