As we know, most industrial users tend to go for long term leases when it comes to warehouse or factory rental.
However, there may be times that short term leases may be necessary due to various reasons and company’s direction.
Opportunity Cost
Landlords usually prefer long term leases as they will not need to keep sourcing for new tenants that many times. In between leases, there is also a possibility that the industrial space will be vacant for a period of time. This means opportunity cost for the landlord as they could have rented it to a long term tenant who will be able to occupy the space consecutively for 3 years without breaks in between.
More Resources Required
Other than the efforts and time needed to source for new tenants, there are also administrative and other works to be done for each new lease.
Examples of such works will be reinstatement of unit by outgoing tenant, takeover of unit from outgoing tenant, preparation of tenancy documents, handover of unit to incoming tenant etc.
Rental Rates May Not Be The Same For Short Term Leases
For short term leases, rental rates may be higher due to administrative, labour, opportunity and other cost incurred.
Hence, you may find that short term leases may have higher rental rates as compared to long term leases.
Why Long Term Leases Are Good for Both Tenants & Landlords
Long term leases are actually good for both tenants and landlords. This is true as tenants tend to invest in renovation or fitting out. As the amount may be quite a bit, most tenants prefer to stay for the long term as they have already invested in the initial renovations or fitting out for better corporate image.
Furthermore, fitted industrial spaces which are in move in condition are also rare. This is usually true as the renovation done for the previous tenant may not be suitable for the next company’s operations due to the different nature of business, different set up and different way of operating.