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Why Shorter Term Industrial Space Leases Are Usually at a Premium Rental Rate

Why Shorter Term Industrial Space Leases Are Usually at a Premium Rental Rate

Sometimes we may have the impression that short term and long term lease are the same and it will be a good thing just to have the industrial space leased out rather than to keep it vacant. However, if you were to put yourself in the owner’s or landlord’s shoes, you would probably understand why sometimes shorter term industrial space leases such as short term warehouse or factory leases may come at a premium rental rate.

More Work to Be Done for Short Term Leases

For short term leases, the amount of documentation and paperwork remains the same despite the shorter lease term. Whether the owner or landlord enters into a shorter term or longer term lease, there is not much difference in terms of documentation required. Some examples may be letter of intent, tenancy agreement, stamp duty, verification of the necessary payment, handover & takeover documents etc.

Because the amount of work remains almost the same for a short term lease as compared to a long term lease, more work would be required for shorter term lease over time as multiple tenancy agreements or documents are likely required for short term lease whereas for a long term lease there may only be a set of documentation for the same duration of time.

Handing & Taking Over Requires Same Effort & Time for Any Lease Term

Whether a owner or landlord enters into a short or long term lease, the owner or landlord would still need to go through the same steps of handing and taking over of the unit. This may require preparing the keys and documents to make sure the premises are handed or taken over properly. If the landlord decides to rent on a short term basis instead of a 2 or 3 years lease, the landlord may need to hand and take over the premises a few times as compared to a long term lease which may require only one round of handing and taking over.

Short Term Tenancy Means Having to Look for a New Tenant Soon After Just Leasing Out

For short term tenancies, even though the space has just been leased to a new tenant (if accepted by the landlord), the landlord will very soon have to start looking for a new tenant. As compared to a long term lease, more effort and resources may be required to source for new tenants for short term leases since the lease term is shorter and will expire quite soon. During the short term lease period, showing of the unit may also be required and prior arrangements have to be made with the short term tenant occupying the unit in order to set up a viewing appointment at a certain day and time.

It may be important to understand the main reasons why shorter term leases are usually done at premium rental rates so that we can make quicker and better business decisions especially if we require an industrial space for lease urgently. Furthermore, not many landlords are willing to do it short term as it may be more tedious and may require more resources than long term leases over time.