The highest-quality office spaces on the market are considered A-Grade. Generally, these spaces are newly constructed and offer premium fixtures, amenities and systems. Aesthetically pleasing and generally of notable presence in high-visibility locations such as a city's central business district. A large central reception/lobby is also typical of such superior spaces. Rental rates typically come at a premium due to the attractiveness of A-Grade space.
These buildings generally don’t have the same high-quality fixtures, architectural details and impressive lobbies as A-Grade spaces, but they are generally desirable buildings with fully functional facilities. Rentals are generally around the middle of the range for the area in which the building is located. B-Grade buildings are generally older than A-Grade buildings and may have experienced a degree of deterioration. Some buildings start out with a A-Grade ratings but are downgraded after 10 years or once signs of wear and tear become apparent.
Prime or Premium Grade buildings are landmark buildings featuring the latest in premier quality interior and exterior finishes. They have large floor plates of not less than 1,000m2. Parking space and elevator service is very sufficient. There is also 100% back-up power. Generally, these buildings are centrally located in business districts. For final touches, they have a variety of exceptional and state-of-the-art amenities which set it apart from other buildings. The rentals in these buildings are set well above the market to maintain its exclusivity to a select few tenants.
Beneficial Occupation (B.O.)
Beneficial Occupation is the rent-free period before the Commencement Date of the lease. This period is generally given to the Tenant to allow them time for any fit-out to be done to the premises to prepare it for their Occupation.
A break clause is an option given to either the Landlord or the Tenant (or both) to end a lease early, usually on a specified date by giving notice. A break clause can significantly affect the investment value of a property. If exercised, the income from the property will stop until the property is re-let. A premium is generally required to be paid by the Tenant for the flexibility a break clause offers.
Areas of the building that are for the communal use of all Tenants. These generally include Entrance Foyers/ Reception Areas, Bathrooms, Stairs, Lifts and Passages. These costs are incurred by the Tenant on a pro-rata basis.
A detailed assessment of an individual's credit history prepared by a registered credit bureau. This report provides an indication of the risk profile of the Tenant for the payment of rental for the term of the lease.
Commercial Deposits generally involve the equivalent of between 2 and 3 months’ rental based on the rental payable on the final month’s rental ie if the rental escalates for 3 years the deposit is based on the third year’s monthly rental. This can also be influenced based on the tenant’s references and outcome of the credit checks.
Escalation occurs on the anniversary date of the lease agreement annually and is calculated as a percentage increase in the rental. Generally commercial leases increase between 8% and 10% annually.
FInANCIAL INTELLIGENCE CENTRE ACT (fica)
The Financial Intelligence Centre Act (FICA) of 2001 was formed to regulate money laundering. Accountable institutions are compelled to establish and verify the identity of a natural or legal person or a trust in accordance with regulations.
A permanent fixed piece of furniture or equipment incorporated into a property which, if removed, it would cause damage to buildings or land. It is, therefore, regarded as legally part of it.
Base rental plus any applicable operating costs, but excludes consumables such as water and electricity.
An amount recovered by the Landlord from the Tenant for the upkeep and running costs of the property. Ops costs can include but are not limited to Cleaning, Maintenance, Security, Rates and Insurance etc.
Reasonable Wear and Tear
Damage that can be expected over time in the ordinary course of normal use.
A lease that is given by a tenant of part or all of the leased premises, to another person for a period equal to or shorter than the original lease, while retaining contractual liability for the original lease. The sub-lessee is bound by the original terms of the lease.
Surety binds those that have signed as surety to the obligations of the Lease. Surety is generally signed by the directors of the company entering the lease agreement. Where there are no sureties, a larger deposit is generally requested from the Landlord.
Tenant Installation Allowance (TIA or TI)
Tenant Installation Allowances are given by the Landlord to Tenants to improve the premises. The amount varies but is generally calculated as 1 month’s rental equivalent for every additional year of the lease agreement after year 1. The amount generally goes towards items which include: Flooring, Partitioning, Painting etc.
Usable Area vs Rentable Area
Usable Area is the actual space inside the office/retail premises you are renting excluding the Common Area. Rentable Area is the Usable Area plus the Common Area, otherwise known as the Gross Rentable/Lettable Area (GLA).
This refers to a property that is sold "as is". Following the sale of property, the Seller is not liable for defects after the reasonable inspection of the property.