Lease offer..would you take it???

[Bird Dog]

OK, so it looks like we're about to receive an offer on our Commercial warehouse..

Here's the kicker though.. it will only be for 2 years.

Reason: The customer has purchased a vacant block in the next street that they settle on in 2 weeks. They are currently in a premises they need to vacate in 5 weeks.
Which means they will need somewhere temp whilst the new premises has plans submitted and is then built.
They think they will only need it for 18 months but the agent has already stated "don't even bother with anything under 2 years"
So here are the questions...
1: Does anyone have any idea on approx time frames an industrial building normally (if you could use such a word) takes from the day you start planning permits to the day you'd move in. I know it's a very broad number but I'm only after estimates and the building size would be approx 2,000 Sqm incl an office component.

2: We've had about 5 parties through there in the last 2-3 months so it's getting interest but this will be the first offer we've had. Although it's close to the port of Melb and CBD, it doesn't have a high roof which is a little limiting but not all together bad.
Would you take the lease or wait for a better offer?


3: I'm thinking if they offer a 2 year lease then month to month (once the new place is being being finished) we'd request access to keep showing potentials through from about the 18 month mark.. Thoughts!
What other caveats / clauses should we include in the lease other than the usual make good, access etc?

4: How much and what type of $$$ guarantee should we request? EG:What's the going rate on 2 years and should we simply request this as a bank deposit into our account?

I'm sure I have other questions but that's all I can think of at the moment?

cheers

B.D

 

[chilliblue]

Congratulations. An offer is still an offer and you should be led by what you agent is telling you. They should know the market and if they feel that this is the best that you can do then you should listen to their reasons.


If you are thinking of taking the 2 year lease here are some suggestions:

1. Do not offer an option unless you have a clause that states the offer is consideration as taken up if the tenant does not advise you of same during a period no less than 6 months and no more than 12 months.

2. Clause to state that should they go onto a monthly tenancy, you are allowed to increase their rent by XYZ (I normally state 15%) on the 1st day out of lease and that you have the ability to review the rent every 6 months.

3. Clause to state that viewing inspections have been agreed to during the entire term of occupancy. Come to agreement as to whether this means allocated day of the week, or length of notice for an inspection.

4. Clause to state that the lessor is allowed to place signboards and other advertising on the premises. Again, come to an agreement as to what and where.

5. Bank guarantee or security deposit of minimum 3 months gross rent to be increased to 6 months if the tenant breaches any terms of the lease.

Remember to photograph the property before any occupancy and have the tenant sign their agreement as to the state of the property.

 

[handyandy]

I would take it as a bird in the hand and all that.

I am obviously looking at this from my own perspective and we had a com prop empty for over a year plenty of offers in that time but all for shorter periods, discounts etc and this is for a 95' built 500sqm warehouse office type property in Padstow / Sydney.

Eventual tenant went belly up 8 months in and is now subleasing it to his uncle.

Before excepting I would get the agent to ring all the other prospective and let them know just in case they are sitting on the fence.

Minimum 3 month bond in your bank account

Cheers

 

[Rolf Latham]

Hi

I can only comment on the finance side

if your finance is dependant on the lease income 2 years may be tough when review time comes in 12 mths

ta
rolf

 

[willister]

OK, so it looks like we're about to receive an offer on our Commercial warehouse..

Here's the kicker though.. it will only be for 2 years.

Reason: The customer has purchased a vacant block in the next street that they settle on in 2 weeks. They are currently in a premises they need to vacate in 5 weeks.
Which means they will need somewhere temp whilst the new premises has plans submitted and is then built.
They think they will only need it for 18 months but the agent has already stated "don't even bother with anything under 2 years"
So here are the questions...
1: Does anyone have any idea on approx time frames an industrial building normally (if you could use such a word) takes from the day you start planning permits to the day you'd move in. I know it's a very broad number but I'm only after estimates and the building size would be approx 2,000 Sqm incl an office component.

2: We've had about 5 parties through there in the last 2-3 months so it's getting interest but this will be the first offer we've had. Although it's close to the port of Melb and CBD, it doesn't have a high roof which is a little limiting but not all together bad.
Would you take the lease or wait for a better offer?


3: I'm thinking if they offer a 2 year lease then month to month (once the new place is being being finished) we'd request access to keep showing potentials through from about the 18 month mark.. Thoughts!
What other caveats / clauses should we include in the lease other than the usual make good, access etc?

4: How much and what type of $$$ guarantee should we request? EG:What's the going rate on 2 years and should we simply request this as a bank deposit into our account?

I'm sure I have other questions but that's all I can think of at the moment?

cheers

B.D

Congrats!

What Chillblue said is right on the money...couldn't have said it better myself.

My experience:

The big mistake we made at the time is give options...initially my current tenant requested a total of 3 years fixed first tenure plus 10 yrs worth of options. Agent basically said no to him, because this was way too restrictive for us. In the end and I still think it is a mistake, was to offer a 3x3, he actually wanted 3x3x3.

Granted, every cloud has a silver lining, the first 3 yrs will offer what kind of tenant he is....

What I don't quite understand is locking into really long terms e.g. 5+ years - I'm not referring to options but actual terms. If he/she turns out to be a basket case of a tenant, this would be a nightmare!

 

[Bird Dog]

Thanks to all for the great feedback..
It looks like we'll be moving ahead and just need to get the legal sorted so I will provide an update when we're all said and done.

B.D

 

[Kristine..]

OK, so it looks like we're about to receive an offer on our Commercial warehouse.. for 2 years.

Hi BD

The basic question is would you rather have two years rent or two years vacancy?

A tenant financial enough to be able to buy their own site and build their own factory sounds to be a very good tenant.

Treat them with respect and they may very well continue to lease your premises as offsite storage, warehousing etc even after their new premises are complete

Provided that you are able to board the premises once they have officially given notice that they won't be continuing at the end of the fixed term, and that they allow 'reasonable' access for showing prospective new tenants through, you will have the best of both worlds

All premises rent better when occupied. It is the concept of busy-ness and desirability, rather than an empty, forlorn unwanted site

We have just agreed to our third commercial tenant in the same premises in twelve months - the first two bit the dust in no short order - and let me tell you, your enquiry is worth gold. We have waited a long time for this third tenant and I very nearly refused them simply because of their attitude (which could have been due to language ie they use English in a much more aggressive way than commercial negotiations would usually warrant)

You attract more flies with a teaspoon of honey than you can with a gallon of gall

Hope the two years goes well and that you get a great long term tenant at the end of the time

Cheers
Kristine

 

[Martyn Fleming]

1: Does anyone have any idea on approx time frames an industrial building normally (if you could use such a word) takes from the day you start planning permits to the day you'd move in. I know it's a very broad number but I'm only after estimates and the building size would be approx 2,000 Sqm incl an office component.

Talk to your local town planner on this one. I find that the timings vary between councils. I'm in South East Queensland and every council offers a completely different experience with approval timeframes. Your town planner should be able to tell you what stage their project is up to and the issues they're likely to face. However, building timeframes can be driven by so many other things....

 

[Bird Dog]

See final outcome here:
http://www.somersoft.com/forums/showthread.php?t=69120