How can I negotiate the best deal?

By carefully selecting the right properties on your shortlist you can create a competitive environment whereby the best rent can be achieved. Your Colliers International broker can assist you throughout this process.

What is a square metre?

A square metre is an area of measurement, one metre by one metre. It is approximately equivalent to 10.764 square feet and is the standard unit of measurement for commercial/industrial space in New Zealand.

How much space will I need?

The amount of space you require will vary depending on the nature of your business and the ‘efficiency’ of the space you end up selecting.

Are amenities included in the Net Lettable Area?

The amenities are incorporated within the net lettable area measured and the area that rental is paid for e.g. toilets and kitchens.

What cost elements will my outgoings consist of?

Outgoings means the total of all costs, charges, rates, fees, expenses and other outgoings incurred by the landlord or for which the landlord may be liable in respect of the whole part of the building. These include, rates and operating expenses such as insurance, common area cleaning, repairs and maintenance etc.

What are the differences between: Gross Rent and Net Rent, Effective rent and Face rent?

GROSS RENT is the rent calculated inclusive of all building outgoing costs whereas NET RENT is the rent calculated excluding building outgoing costs. FACE RENT is the quoted rental rate before taking into account incentives or increases whereas EFFECTIVE RENT is the rental rate averaged out over the term of the lease and giving consideration for rent free periods or up-front incentives.

Will I be able to sublease or assign my lease?

Most commercial leases allow the lessee to sublease or assign their premises. Typically, the lessor is unable to unreasonably withhold consent to the sublease/assignment. A prudent lessor however will consider the strength of covenant being offered by the incoming tenant and will be reluctant to accept a sublease/assignment should their financial position/security be reduced as a result of the sublease/assignment.

What additional costs am I responsible for over and above net rent and operating expenses?

In addition to a pro-rata share of building operating expenses you will generally be responsible for electricity and other utility charges, light bulb replacement and cleaning of your own premises.

What are the rent review patterns for the term as well as the renewal period?

Most lessors will have a standardised lease document for their building, including a rent review pattern pre-agreed in light of the lessor’s own objectives and current market conditions. Typically, the two most significant influencing factors on rent review patterns are lease term and the commencing rental. Rent review methods may include fixed increases, structured increases or reviews to market levels (with or without a ratchet clause). A ratchet clause ensures that the reviewed rental can be no less than either the previous year’s rental or commencement rental. CPI, or a margin over CPI, is another common structure. Often review clauses comprise a combination of these throughout the term of a lease. Lessees will typically request a right of renewal as part of the lease negotiation, allowing them to extend their occupation beyond the initial lease term. It is normal that the rent review pattern for this term is set out in the original lease document.

When does my company become legally bound? Or, when does the agreement become legally binding?

During a typical lease negotiation, leasing proposals are used as a medium to determine terms and conditions acceptable to both lessor and lessee. This will lead to a Heads of Agreement document or Memorandum of Understanding, outlining the final position of both parties, and accompanied by a leasing deposit, generally equivalent to two months gross rental as a security deposit. This deposit is typically held in the leasing agent’s trust account to be passed over when unconditional. At this stage the agreement may be conditional. In some cases it may be conditional on lessee and/or lessor Board approval, together with (if appropriate) other approval conditions. The lessee and/or lessor may not be legally bound to commit to the premises until the various conditions are satisfied. The Heads of Agreement document provides a framework by which the agreement becomes unconditional and both parties are legally bound.

How much will my fitout cost?

Every project varies according to the nature of your business and quality to which the interior is fitted out. Hard fitout is often calculated on a per square meter basis which generally range between $550 and $900 per square metre, for medium grade to high grade premises. Soft fitout (workstation, chair, mobile drawers, storage, screen etc but excluding common area furniture) $250 - $500 per square meter, or per person $1,650 - $2800. Some office space will have a fitout already in place and some owners may be willing to contribute to your fitout costs as an incentive.

What is a “Make Good” and how much will it cost?

A “Make Good” is your (the lessee’s) obligation to return the premises to it’s original state upon completion of your lease, usually excepting fair wear and tear of floor coverings.


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