14 December 2017

Art of Space will not confuse you with concepts…foto

Basic rent

Basic price of rent without discounts or incentives.

Lease price per unit area, most often 1 sq. m. It takes into account several factors: the location in which the property is located, the size of the unit and the financing of the developer. During the rental period it is usually indexed.

Effective rent

The amount of rent after taking into account rental discounts or incentives.

Effective rents are about 10 to 15% lower than basic rents. For example, if the basic monthly rent of EUR 4 per sq. m. was set for a period of 5 years, the tenant pays approximately EUR 3.85 per sq. m. after the incentives for that period.

The amount of incentives is influenced by the attractiveness of the location in which the property is located. In highly desirable locations, the developer may not offer any incentives, yet occupy the property without difficulty. In the case of excess demand from tenants, it is customary to enter into a contract with the first bidder. In a less attractive place or where there is stronger competition, the incentives may be even higher.

Rent holidays

The period during which the tenant does not pay rent.

Rent holidays are one of the incentives developers can use to motivate the tenant to conclude the contract. For example, a so-called fit-out contribution, i.e. a financial contribution for modifying the space or a special technical solution included in the standard price (see Glossary: fit-out).

For example, when a developer offers a three-month rent holiday, the tenant pays rent only once in four months. Rent free is usually provided at the beginning of the lease term, but it can be evenly distributed over the entire lease period or ranges over the period when the tenant expects more investment.

Rent holidays do not usually involve advances on operating costs.

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