Fort Lauderdale, Florida was the venue for ITRA Global’s Spring Conference held at the Pelican Grand Beach Resort on April 8-10, 2016. The event was attended by the principals of ITRA Global offices around the world, along with select guests.
ITRA Global Chairman Emeritus, Debra Stracke Anderson, of Sloan Street Advisors, Inc. / ITRA Global, Washington, D.C., moderated an expert global panel consisting of executives from ITRA Global’s international offices who shared extensive corporate real estate expertise from throughout Canada, Europe and Australia. The panellists delivered both personal and professional insights into leasing protocols, key industry processes and national practices across multiple markets and jurisdictions.
Among the many on-trend topics discussed by the panel was IFRS 16 - the new international accounting standard for leases – along with the immediate and long term business implications of ‘Brexit’ - Britain’s potential exit from the European Union and the subject of a UK-wide referendum on June 23, 2016.
Lisa Seun, ACORPP / ITRA Global executive for Perth and Brisbane Australia, reflected on a worrying 20% vacancy rate. Turning conditions into advantage, Ms. Seun successfully capitalized on the downturn in these markets by renegotiating and extending clients’ existing lease terms in return for lower rental rates and other concessions, proving that today’s market conditions translate to a prime opportunity for tenants to upgrade to better quality offices or facilities.
Ms. Seun advised that periodic rent reviews occur typically every 1-3 years during the term of a lease and can result in an increase or decrease in rent depending on market conditions, unlike in the United Kingdom where rent reviews occur every five years and are “upward only”. Australia embraces the European model whereby the tenant or end-user is responsible for its broker’s fees. This differs from the United States and Canada, where the owner or lessor pays the broker’s fees.
Charles Tatham, Director of ITRA Global and principal of Tatham Property Solutions / ITRA Global Paris, France, has observed a gradual relaxation of the standard nine-year lease term wherein breaks every three years are possible and lease documents are often as short as 10 pages. Mr. Tatham pointed out that rent reviews are subject to official Government annual indexation rather than fixed escalation provisions more familiar to North American markets.
Fred-Anton Knoop, principal of AREA Occupier Solutions / ITRA Global, in Amsterdam, reported that the Netherlands embraces short 3-4 page leases, plus a negotiable 12-page General Conditions document which is binding on landlord and tenant. Lease terms tend to be five or ten years with break options at intervals and rents also subject to annual Government indexation. Like Paris and London, Amsterdam’s Grade A prime vacancy rate is below 5%.
Brad Goegan of Nidea Realties Corporation / ITRA Global in Toronto, Canada, described a highly competitive 7% vacancy rate in the Downtown Financial Market. Leases of 45 pages are fairly typical. Renewal, non-restoration, favorable assignment and/or termination rights are negotiated as special provisions. There is a high concentration of institutional ownership in the Toronto market, resulting in landlords being ‘face rate’ sensitive to preserve asset valuation. Tenant inducements will typically include free rent periods and tenant improvement allowances in order to support the face rates.
Similar to the rest of northern Europe, Martin Levy, principal of The Levy Group / ITRA Global, London, reaffirmed that tenants are responsible for paying their broker’s fees. Lease documents in London are often more than 40 pages, are invariably drawn in favor of the landlord and rarely offer security of tenure. Lease terms of 10 -15 years are customary and landlords will generally accept tenant breaks at five or ten year intervals, occasionally subject to a financial penalty. Mr. Levy noted that a tenant cannot commence any build-out until the lease has been formally executed. Landlords will grant a rent free period rather than make cash contributions towards tenant improvements. Current vacancy rates in central London are 3-4% for prime Grade A office space.
About ITRA Global
ITRA Global is an organization of real estate professionals specializing in representing commercial tenants and buyers in the leasing, acquisition and disposition of office, industrial and retail facilities. With coverage in major markets around the world, ITRA Global is one of the largest organizations dedicated to exclusively representing tenants and occupiers of commercial real estate. Now in its 24th year, ITRA Global continues to set the benchmark in Tenant Representation on a worldwide platform, providing the highest standards of professional care, advocacy, experience and agility to deliver innovative and measurable real estate solutions to corporate occupiers.
