Leasing your property
Key things you need to consider before going to market to ensure you maximise the return on your investment.
Future plans for your property should be at the forefront of your thinking when leasing premises. How you structure a lease should reflect whether you are looking to hold the property long term or whether you have a shorter ownership timeframe in mind.
If you are looking to sell in the short to medium term, then the longer the lease/s in place the better to attract investors and secure the best possible price. You may need to consider a leasing incentive, which most commonly involves an initial rent-free period or a contribution to fit-out, to secure a longer lease.
Leases with rent reviews that provide assured rental growth, through fixed or stepped annual rental increases or increases based on CPI plus a margin, are also attractive for investors.
If you have a longer term ownership horizon then cash flow will be your main consideration and an incentive may not be necessary given the current strong leasing market which is weighted in landlords’ favour. Shorter, more flexible lease terms can work to your advantage, particularly where the property has add-value or development potential. Rent reviews to market may also work well for you given we are currently in a period of rental growth.
Most leases incorporate rights of renewal which are of benefit to the tenant but reduce a landlord’s flexibility. Given the shift in the balance of power in the market to landlords, we are witnessing more leases being transacted without rights of renewal.
However, it is important that a leasing transaction is seen as a “win win” for both parties and your Bayleys leasing agent can advise on what is the best approach for your particular circumstances.
How you present your property for lease is important as first impressions count. However, bear in mind tenants will have their own ideas and brand requirements for how they want their premises to look. Undertaking a refurbishment that is not to their liking may be counter productive.
But at the very least, it is imperative your vacancy is presented in a very clean and tidy condition – right from the tenancy and building entrance, through in to the interior and common area services.
Front of mind for nearly all tenants these days, in the wake of the Canterbury earthquakes, is a building’s seismic rating and they will generally ask for information on this. There are two main assessment methods:
Initial evaluation procedure: Developed by the New Zealand Society of Earthquake Engineering (NZSEE), this is a checklist that provides an indication of a building’s seismic performance relative to the minimum strength to which a modern building would have to be constructed. The result of this assessment is a percentage score of the New Building Standard (%NBS) from which it is possible to determine whether a building is potentially quake-prone (less than 34%).
Again, your Bayleys leasing agent can advise what is appropriate for your premises.