• Building Management
    Blog

Abatement versus Incentive | What Do These Terms Actually Mean

Abatement versus Incentive:
The Lease agreement or contract between the Landlord (lessor) and the Tenant (Lessee) has various parameters for negotiation, one of the points of opportunity, for both parties is rent abatement or incentive.
The terms are not mutually exclusive but rather codependent.Abatement versus Incentive

WIFM – “What’s In It For Me

The WIFM, for the tenant can be considerable and its an opportunity to negotiate around the “face” price, think of when you were buying your car, the dealer, has a set price for the car, which is hard to change because it’s set by the factory, so what can the dealer do to “incentivize” you, as the customer, to buy.

Often the dealer will “add value” by offering peripheral components which seem like “free” if you purchase, for example, tinted, windows, road side assist, tow bar, and the list goes on.
The Commercial Property Lease is similar in that the “incentive”, as the name implies, is giving something back to the purchaser or lessee as it were to encourage you to buy.

What is Abatement?

Abatement, is one of several incentives, a commercial Landlord might offer, and it is the reduction of “face” rent expressed in a percentage. The rental abatement might be negotiated over the entire term of the lease, or just a portion, for example your rent might be offered as $100 + GST per square meter per annum, the incentive (to encourage you to take the lease) might be say 15%, so your “actual” rent would be $85 + GST per square meter per annum.
The word “abatement” is also an accounting term, which is seen on your invoice for your monthly rent.

What other incentives are there

The negotiation with the Landlord or lessor can bring to light other opportunities which have great advantages for the tenant or lessee.
Fit-out contributions, Rent free period, car parking space, and other convenient and cost effective opportunities can be put on the table, subject to the building, the commercial market, the urgency on either party and so forth.

Negotiations are not an argument but a creative opportunity for both parties to bring their wares to the table for improved intrinsic value for all.
Under the banner of incentives, are cash or rent reduction, which is rental abatement, as well as many others; its a strategic decision by the prospective tenant and/or their representative to negotiate the best deal for what really supports the tenant’s business to grow and prosper, and its up to the Landlord to do the same.

 

Leave a Reply

Your email address will not be published. Required fields are marked *

Facility Management Software Benefits include: Mitigating Risk Automated Planned maintenance Schedules Contractor Management WH & S Management Simplify Day to Day Work Document Management Real time updates, Reports and info via web Portal Sustainability Management Automated Scheduled Reports Report across the entire Portfolio FM Innovations®, an Australian company based in Melbourne, is the specialist in […]

Tenant Lease In the larger commercial buildings and retail centers a tenant might find a condition in their lease instructing them to use the base building cleaning company for their janitorial requirements; why would the landlord have such a requirement. This requirement is actually in the benefit for both the landlord and the tenant, as […]

The false economies if reusing commercial furniture in an office space The Commercial Furniture Fail .We look at a few different scenarios and none of them prove themselves to be the money saver a tenant might think. In fact it can cost a tenant more! As Facility Managers we are often asked by the Landlord […]

Time Management, a Case for Facility Management Software: Yes, Facility Management Software Helps to be Organized or No, the facility management software is a Complete Waste of time and money. Which team do you subscribe to? A privileged example: Chapter 1 – The Scene It’s been a good week, most of our buildings are ticking […]

Negating the “Management by Crisis” Scenario! Experienced Managers Know this Expression. Typically, a result of lack of resources, every industry manager has had the experience and every manager looks forward to the crisis coming to a swift and economic conclusion. So how do we avoid or reduce the occurrence of situations which envelop us, sometimes […]

Outsourcing the House Keeping for the Hotel – “What a Stupid Idea!!” The conversation went a little like this: “Who’s idea was that, no one does that!”, “what am I gonna all day?” and “how we gonna know what goes where, like we do now!” “We gonna have to have double of everything”. I think […]