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Rent free periods: The real cost With Justin Boelen, Director ACORPP
While the flight to quality continues and office vacancy rates in Perth continue overall to edge upwards, any signs of stabilisation may take a hit when Woodside’s new headquarters are completed, and that’s projected to be within the foreseeable 12 months. When the resource giant vacates its current location at 240 St Georges Terrace, it will leave behind some 30,000 square metres of empty space - another potential headache for the beleaguered CBD office market.
Commentators say this exit is likely to push the overall office vacancy rate to 24% by mid-2018. Some six months ago, the Property Council of Australia pegged the Perth rate at 22.5%. The upshot is that it’s still a tenant’s market, but building owners and landlords are not necessarily giving up precious face rent without a comprehensive rear guard action. They say the devil is in the detail and in this case that complexity is usually found in the lease. When times are tough and rents are under pressure, tenants often believe they are in the driver’s seat as they are presented with amazing incentives – which can be anywhere between 2.5 to 6 years rent-free periods over, say, a 10-year lease.
Score, right? Well, maybe, but probably, no. This is the time to get the magnifying glass out and pore over the lease agreement line by line – before you sign. You need to really understand all those extra charges that may be in that lease document: exit fees, make-good charges, management fees, maintenance fees, lease fees – the list goes on and can amount to substantial expense over the life of a lease. You may find those rent-free years weren’t as free as you thought.
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