Global Office Occupiers Guide 2011

GLOBAL OFFICE
OCCUPIER GUIDE 2011

CB RICHARD ELLIS | GLOBAL RESEARCH AND CONSULTING
By George Relyea
Nick Axford
Richard Holberton
Andrew Ness
Kevin Stanley
Raymond Wong
GLOBAL OFFICE
OCCUPIER GUIDE 2011
CB RICHARD ELLIS | GLOBAL RESEARCH AND CONSULTING
US$ 495
FOREWORD
February 11, 2011
We are pleased to bring to our clients the 2011 edition of the CBRE Global Offce Occupier Guide. Real estate
leasing practices can differ signifcantly from country to country, and individual leases can be challenging to
understand, negotiate and execute. We have prepared this reference guide on worldwide leasing practices to
help mitigate that complexity.
Preparing such a guide on a global scale was originally the brainchild of George Relyea, and we are thankful for
his dedication to this project and for the diligence of his work. The Global Offce Occupier Guide would not be
feasible, however, without the efforts of many CBRE professionals worldwide, who provide us with the important
details of leasing practices in their respective markets. Also crucial to the guide is the leadership and project
management of the regional Research heads. Our sincere gratitude to our Global Research teamRichard
Holberton (EMEA), Nick Axford and Andrew Ness (Asia), Kevin Stanley (Pacifc) and Raymond Wong (Americas)
and their respective colleagues.
Finally, we ask clients and CBRE professionals to contact us if we can assist you in any way. We welcome sugges-
tions for improvements and thoughts for other reference documents as we aim to meet the needs of our clients
around the world.
Raymond Torto, CRE, Ph.D.
Global Chief Economist
Karen Ellzey
Executive Managing Director
Global Corporate Services
CB Richard Ellis, Inc. Global Offce Occupier Guide 2011
Americas
Canada & USA
Canada .................................. 3
United States ........................... 8
Manhattan ............................ 15
Latin America
Argentina .............................. 18
Brazil .................................... 22
Chile ..................................... 26
Colombia .............................. 30
Mexico .................................. 35
Panama ................................ 38
Peru ...................................... 42
Venezuela ............................. 47
EMEA
Austria .................................. 52
Bahrain .................................. 56
Belgium ................................ 59
Czech Republic ...................... 63
Denmark ............................... 67
Finland ................................. 71
France .................................. 75
Germany .............................. 81
Ghana ................................... 86
Greece .................................. 90
Hungary ................................ 95
Ireland .................................. 99
Israel ................................... 104
Italy ..................................... 108
Kazakhstan .......................... 112
Luxembourg ......................... 118
Morocco ............................. 122
Netherlands ........................ 125
Norway ............................... 129
Poland ................................ 132
Portugal .............................. 136
Romania ............................. 140
Russia ................................. 145
Serbia ................................. 152
Slovakia ............................... 155
Spain .................................. 159
Sweden ............................... 164
Switzerland ........................... 167
Turkey ................................. 171
Ukraine ............................... 174
United Arab Emirates ........... 179
United Kingdom .................. 185
Asia Pacifc
Australia ............................. 191
New Zealand ....................... 195
China .................................. 199
Hong Kong .......................... 204
India .................................... 209
Japan .................................. 214
Malaysia .............................. 219
Philippines ............................ 223
Singapore ............................ 228
South Korea ......................... 231
Taiwan ................................. 236
Thailand .............................. 240
Vietnam ............................... 244
2 CB Richard Ellis, Inc. Global Offce Occupier Guide 2011
Americas
CANADA & USA
Canada ................................ 3
United States ......................... 8
Manhattan .......................... 15
LATIN AMERICA
Argentina ............................ 18
Brazil .................................. 22
Chile ................................... 26
Colombia ............................ 30
Mexico ................................ 34
Panama .............................. 38
Peru .................................... 42
Venezuela ............................ 47
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Calgary
Montreal
Vancouver
Windsor
Toronto
Edmonton
Halifax
St. John
St. Johns
Winnipeg
Kitchener
London Oakville
Ottawa
GREENLAND
U. S. A.
CANADA
CANADA
LEASE LENGTH
Term
The lease term is negotiable and can be for any length. A term of 510 years is most common. Large tenants often
negotiate terms of 1015 years with specifc rights for renewals, for expansion, and for input on specifc operating
issues.
Termination
No right to terminate (break) or extend exists unless included in the lease. Termination options are not typical. When
included they often provide for a penalty payment or termination payment if exercised.
Renewal
An option to extend usually includes a provision for determining fair market value, which may be subject to arbitration
in the event of a disagreement.
SPACE MEASUREMENT
Defnitions
While Canada is offcially a metric country, offce space is measured in square feet, except for government
leases. 1 square foot = 0.09232 square meters; 1 square meter = 10.763104 square feet.
Rentable Area: Landlords usually quote rentable square feet, with washrooms and other common areas al-
located to each space leased, so that the rentable square footage exceeds the usable square feet.
Usable Area: Most landlords measure usable area using the BOMA (Building Owners and Managers
Association) Method.
Carpetable Area: Space planners normally measure the net usable area, sometimes called carpetable area,
which is the foor area of space occupied exclusively by the tenant. It excludes primary circulation (space between
elevators and tenant space) and excludes space occupied by washrooms, exterior walls, and convectors.
Calgary
+1 403 263 4444
Edmonton
+1 780 424 5475
Halifax
+1 902 492 2090
London
+1 519 673 6444
Montral
+1 514 849 6000
Oakville
+1 905 469 4704
Ottawa
+1 613 782 2266
Saint John
+1 506 648 3422

Saint Johns
+1 709 754 1454
Toronto North
+1 416 494 0600
Toronto West
+1 416 674 7900
Vancouver
+1 604 662 3000
Waterloo Region
+1 519 571 8609
Windsor
+1 519 252 4095
Winnipeg
+1 204 943 5700
CBRE OFFICES
Gross-Up Factor: In Canada, the term gross-up factor has the same meaning as loss factor in the U.S.
Gross-Up Factor = -
Rentable AreaUsable Area
Rentable Area
Effciency
Gross-up factors vary from location to location.
Toronto: The gross up factor depends on which BOMA standard the landlord uses. Older buildings generally use
BOMA 1980. New ones use BOMA 1996. The gross-up factor can vary from a low of 5% for a full foor tenant
under BOMA 1980 to as high as 20% for a multi-tenant foor under BOMA 1996.
Vancouver: 1218% is typical.
Calgary: 1520% is typical.
Montreal: 13% is typical.
OCCUPANCY COSTS
Defnitions
Gross occupancy cost = rent + operating costs + taxes + hydro.
The term hydro means electricity used in the tenants premises.
The term gross rent is rarely used in Canada. When used, it has the same meaning as gross occupancy cost,
but unlike in the U.S., it includes the cost of electricity.
Rent
Recent Rental Rates: Please visit CBREs Global Knowledge Center: http://gkc3.cbre.com/search/search.aspx
Rent Quoted: Landlords quote Base Rent in Canadian dollars (CAD) per rentable square foot per year.
Net Rent: In most Canadian cities, rent is expressed as net, not gross, rent. Net rent excludes operating costs,
real estate taxes, building insurance and utilities.
Rent Payable: The tenant normally pays rent monthly in advance.
Rent Increases: Leases may include negotiated increases over the lease term.
Operating Costs
The landlord estimates operating expenses at the start of each year. The tenant pays operating costs monthly, along
with the rent, based upon these estimates. The landlord reconciles actual costs at year-end, then charges or credits the
tenant based on fnal totals. The landlord typically amortizes capital improvements using generally accepted account-
ing practices. The tenant may have the right to review the landlords summary statements and supporting documents.
Taxes
Property Taxes: The tenant typically pays a proportionate share of property taxes assessed against the building
or development. If the assessed taxes are not fnal at the start of a lease year, the tenant pays them based upon
the landlords estimates, and the account is reconciled at year-end.
Goods & Services Tax (GST): This is equivalent to VAT in other countries, and applies to all rental amounts
payable to the landlord. GST is 5%, effective January 2008.
Provincial Sales Tax (PST): Some provinces charge PST additionally.
Harmonized Sales Tax (HST): A few provinces combine GST and PST into an HST.
Utilities
The tenant pays for electricity (known as hydro) and all other utilities to operate the premises. The landlord uses one
of three methods to calculate the electricity charge: (1) Proportionate share: the landlord charges for electricity per
rentable square foot. (2) Direct meter: the tenant pays the utility company directly, based on an electric meter. (3)
Submeter: the landlord buys the electricity from the utility company. The tenant pays the landlord, without a mark-up,
based on the landlords meter. Some landlords provide suite/foor specifc metering.
Canada
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Tenant Improvements
Landlord Work: The landlord normally pays for base building improvements such as suspended ceilings, ceiling
lighting, HVAC distribution, sprinklers, and common washrooms.
Tenant Improvements: The tenant pays for its own improvements including hard costs (construction) and soft
costs (architect, engineers) for the tenant work. For small installations, the landlord usually handles the design
and construction. For space not in move-in condition, the landlord normally provides an allowance. For larger
installations, the tenant normally hires an architect or designer and a contractor. Landlords require pre-approval
of the contractor and may direct the tenant to select from a short list of approved contractors. Landlords typically
charge for the review of the design documents and require some supervisory rights over the improvement work.
Tenant Improvement Costs: Costs in CAD per square foot for Class A or Prime buildings are as follows:
- In Toronto, Montreal, Ottawa, Halifax, and Winnipeg: tenant construction: CAD 45100; furniture: CAD
3060, IT wiring: CAD 410, design and engineering: CAD 412.
- In Calgary, Edmonton, and Vancouver: tenant construction: CAD 6080; furniture CAD 3060; IT wiring:
CAD 320; design and engineering: CAD 712.
Security Deposit and Guarantees
Typically, a security deposit can be either cash or a letter of credit. A tenant with a strong credit rating may provide the
equivalent of 02 months rent as security. A startup company may have to provide 36 months rent. When security
is a cash deposit, either the landlord or the tenant receives the interest on it, as negotiated.
Restoration
Tenants often negotiate the restoration obligations. Specialized leasehold installations generally have specifc restora-
tion obligations.
Incentives
Incentives are negotiable, and may include one or more of a tenant improvement allowance, free rent, move allow-
ance, takeover of rent at previous building, and allowance for furniture. A large tenant may negotiate the right to
name the building.
TRANSACTION COSTS
Brokerage Commissions
The landlord or sublessor pays the commission to the broker who represents the tenant and a listing fee to the broker
who represents the landlord or sublandlord.
In most Canadian cities, the landlord pays the tenants broker a commission calculated as a fat fee per square foot
per year at a rate determined by industry standard, which vary by city. Sometimes the commission is calculated as a
percentage of the rental amount over the term of the lease.
Commissions to the tenants broker in larger cities range between CAD 0.601.25 per square foot per annum.
Legal Fees
The landlord pays its lawyers to prepare and negotiate the lease. The tenant pays its lawyer to negotiate the terms.
OTHER LEASE PROVISIONS
General
Toronto and Vancouver: Standard tort and contract laws apply.
Montreal: There are specifc Articles in the Quebec Civil Code relating to real estate, starting at article 18.51.
Calgary: Alberta Real Estate Act applies.
Standard Lease Contract
Toronto and Vancouver: Each landlord has its own standard lease.
Montreal: There are standard offers to lease, but landlords normally use their own leases.
Canada
Right to Sublet
Subletting (subleasing) is the most common way to dispose of unneeded space. Typically, the landlord agrees and
sets forth in the lease agreement not to withhold or delay consent unreasonably. The landlord may retain some or all
of the following rights: to approve the subtenant, to recapture the space, to impose conditions such as limiting the
number of subtenants, exclude certain business uses, and impose fnancial and operational restrictions.
Option to Expand
This is a negotiable clause in the lease, especially for large tenants with long-term leases.
Right of First Refusal
This is a negotiable clause in the lease that provides the tenant the right to secure additional space that may come
available during the term of the lease.
Late Delivery by Landlord
This is negotiable. In Montreal, a typical fee is one month of free rent for each day the landlord is overdue.
Holdover by Tenant
Negotiable.
Signage and Naming of Building
Exterior signage may be negotiable. Naming the building may be negotiable, especially for large long-term tenants.
Other Lease Provisions
Negotiable.
OFFICE LEASING MARKETS
General
The Real Estate Business Brokers Act, with provincial governing councils and local real estate boards, regulates the
real estate industry.
Tenant representation is well developed in Canada. Tenants typically engage a broker for real estate transactions,
including major renewals. Landlords utilize in-house staff or engage brokers to represent them. Large brokerage
frms often have separate teams representing the tenant and the landlord.
Following an unconditional acceptance of an offer to lease, the tenant delivers a security deposit (usually equivalent to
two months rent), which may be applied to frst rent due or the frst months rent, and the balance is held as a security
deposit for the term of the lease. If the parties do not execute the lease, the security deposit is normally returned to
the tenant, as most agents would provide for this.
When the offer is complete, the landlords real estate lawyer prepares the lease. In some markets, and with large
corporate tenants, landlords negotiate with leases that the tenant provides. The tenants real estate lawyer and the
broker review and negotiate the fnal lease terms with the landlord.
When both sides have agreed on all terms, the landlords lawyer prepares execution copies for signature.
An offer can be binding. The tenant engages a broker who negotiates the business terms with the landlord, and sum-
marizes the terms in an Offer to Lease or a Proposal Letter. If both parties execute the offer, it is legally binding, unless
the offer states that it is conditional upon subsequent negotiation of a lease and additional due diligence criteria.
Transparency
Lease and sales transaction data and other market information are available to tenants through leading brokerage
frms like CBRE. Professional real estate providers generally know the deal terms and landlord concessions of recent
completed deals, and are willing to share this information with clients they represent.
Building Classifcation
Class A: High-quality buildings with high-quality fnishes, state-of-the-art systems, and excellent accessibility. The
very best buildings are sometimes called trophy buildings.
Class B: Average quality buildings with average rents. Building fnishes are fair to good. Systems are adequate.
Class C: Buildings of below-average quality and below-average rents.
Canada
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FOR MORE INFORMATION
CB Richard Ellis, Canada
Kim Mercado
National Director of Research
+ 416 815 2375
kim.mercado@cbre.com
About CBRE Canada: www.cbre.ca/
For CBRE Canada Research: http://www.cbre.ca/EN/Research/
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Canada
U.S.A
MEXICO
CANADA
ALASKA
HAWAII
Albuquerque
Las Vegas
Reno
Tucson
Bakersfield
Charleston
El Paso
Fresno
Portland
Fort Wayne
Tulsa
Fort Lauderdale
Palm Beach
Fort Myers
Naples
Buffalo
Charlotte
Cincinnati
Cleveland
Dallas
Detroit
Jacksonville
Kansas City
Miami
N
ew
Y
ork
Norfolk
Omaha
Orlando
Pittsburgh
Rochester
Seattle
Boca Raton
Baltimore
Chicago
Houston
Los Angeles
Louisville
Memphis
Milwaukee
Minneapolis
P
hiladelphia
Portland
Tacoma
Kent
Bellevue Spokane
San Diego
San Francisco
St. Louis
Tampa
Bannockburn
Bethesda
Oak Brook
Schaumburg
Portsmouth
L
ong Island
Grand
Rapids
Goshen
W
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a
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S
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B
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n
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L
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P
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rte
Edwardsburg
Syracuse
Toledo
Anaheim
Commerce
Corona
Temecula
Indian Wells
Newport Beach
Ontario
Stockton
Oakland
Palo Alto
Pleasanton
San Jose
Akron
Appleton
Clearwater
E
ast B
runsw
ick
Albany
Atlanta
Greensboro
Austin
San Antonio
Boston
Columbia
Columbus
Denver
Des Moines
Harrisburg
Hartford
Indianapolis
Lansing
Nashville
Oklahoma City
Phoenix
Raleigh
Richmond
Charleston
Sacramento
Salt Lake City
Providence
Madison
Manchester
New Haven
Stamford
Saddle Brook
Washington D.C.
Tysons Corner
Honolulu
Maui
Atlanta
+1 404 504 7900
Boston
+1 617 912 7000
Chicago
+1 312 935 1400
Dallas
+1 972 458 4800
Denver
+1 720 528 6300
Detroit
+1 248 353 5400
Houston
+1 713 881 0900
Los Angeles
+1 213 613 3333
Miami
+1 305 374 1000

New York
+1 212 984 8000
San Francisco
+1 415 772 0123
Washington, DC
+1 202 783 820
UNITED STATES
MAJOR CBRE OFFICES
LEASE LENGTH
Term
A lease can be of any length. Five to ten years is most common. Three years is common for small transactions,
especially when the tenant requires minimal renovation to a previously built space. Large transactions are often for
15 years or more, especially when a tenant requires substantial ft-out (build-out). Tenants with long-term leases often
protect themselves with expansion, extension, and even contraction rights in the lease documentation.
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Termination
The tenant has a right (option) to terminate (break) a lease only if included in the lease. Termination options usually
provide that if the tenant exercises its option to terminate, the tenant will reimburse the landlord unamortized costs,
including ft-out, incentives, and fees, and sometimes pay additional fnancial penalties.
Renewal
An option to extend or renew may be negotiable. A renewal option usually provides for a revised base rent, such as
95% of fair market rent. Most leases specify how to resolve disagreements as to market rents.
SPACE MEASUREMENT
Defnitions
Rentable Area (Rentable Square Feet, RSF): The landlord quotes the amount of space on a rentable square foot
basis. One square foot equals 0.09232 square meters. The rentable area typically includes the usable area
within the tenants premises plus an allocation of common areas of the building.
Usable Area (Usable Square Feet, USF): The usable area is the amount of space that the premises occupy,
although measurement results depend on the measurement method used. Landlords in most U.S. cities use the
BOMA (Building Owners Management Association) method of measurement to determine the usable and rent-
able areas. In New York City, landlords use the Real Estate Board of New York (REBNY) method of measurement
to determine the usable area.
Net Usable Area (Carpetable Area): Space planners often refer to the net usable area (carpetable area), which
is the foor area of space occupied exclusively by the tenant, excluding required washrooms, excluding the area
occupied by exterior walls and convectors along windows, and excluding primary circulation, i.e., the corridor
and elevator lobbies outside of the tenants space.
Load Factor: A pro-rata space allocation for building common areas, lobbies, hallways, washrooms, vertical
penetrations, etc.
Load Factor = AddOn Factor = Core Factor = -
Usable Area
Loss Factor: The percent of the rentable area that is not usable. A loss factor of 20% means that 20% of the
rentable area is not usable area, or in other words, the usable area is 80% of the rentable area.
Loss Factor = -
Rentable Area

Effciency
Load and loss factors depend upon foor size, amount of common areas within a building, foor confguration, and
measurement method. Multi-tenanted foors may have higher loss or load factors than single-tenanted foors. In most
of the U.S., load factors are generally in the 1215% range. Manhattan load factors are at least 25% for full foor
tenants, and are usually higher in newer buildings. In San Francisco, 1215% is common, but buildings built prior
to1967 and after 2000 tend to have higher factors of 1825%.
United States
OCCUPANCY COSTS
Defnitions
Rent Quoted: Rent is usually quoted in U.S. dollars per rentable square foot per year; however, in several Pacifc
Coast markets, rent is quoted in U.S. dollars per rentable square foot per month.
Gross Rent: The tenant normally pays rent on a gross basis. Gross rent includes a tenants proportionate share
of base year operating costs (common area utilities and cleaning, management fees, etc.), real estate taxes and
property insurance. The tenant pays its proportionate share of any increases each year.
Net Rent: Occasionally, the tenant pays rent on a net basis, also known as triple net rent. Net rent excludes
operating costs, real estate taxes, and property insurance. The landlord bills these costs to the tenant in addition
to the net rent. Generally, single tenant offce buildings charge net rent.
Rent
Rent Payable: The tenant normally pays rent monthly in advance.
Fixed Increases: Also called bumps or rent escalations. Parties often agree to some form of base rent increase
annually or at specifed future dates.
Free Rent: Landlords in many markets offer free rent as an incentive to a new tenant or to a creditworthy renew-
ing tenant. Free rent is taken at the start of the lease, or as agreed over the course of the lease. The amount of
free rent varies depends on the lease term, the rent, other incentives provided, and current market conditions.
Operating Costs
When a tenant pays gross rent, the landlord pays the base year operating costs of the building. The tenant pays its
proportionate share of increases in operating costs for subsequent years, sometimes with a negotiated maximum, or
cap. Common methods that landlords use to recoup operating cost increases are:
Direct Operating: The tenant pays a proportionate share of increases to actual operating costs. Operating costs
normally exclude the cost of amortized capital improvements and building management salaries. The landlord
normally estimates the operating costs for the ensuing year and averages such costs over a twelve-month
period. At the end of each year, the landlord provides an accounting of the actual costs and credits the tenant
for any overages, or invoices tenant for any underpayments. Tenants with leases that provide for direct operating
increases should obtain the right to audit the landlords fnancial records and cure any discrepancies.
Consumer Price Index (CPI): Rent rises with infation based on a consumer price index, typically a local index
published by the U.S. Department of Labor, Bureau of Labor Statistics.
Fixed Increases: In some cases, the landlord pays all operating cost increases, and the tenant pays a fxed
percentage increase in base rent, typically 23.5% per year.
When a tenant pays net rent, then the tenant pays its pro-rata share of the full operating costs.
Taxes
If a tenant pays gross rent, the landlord pays base year real estate taxes (property taxes), and the tenant pays its
proportionate share of tax increases in subsequent years. The base year is normally the fscal or calendar year closest
to the frst year of the lease term or the initial twelve months of the lease term. In most cases, the landlord provides
an estimate of the real estate taxes for the ensuing year and averages such costs over a 12-month period. At the end
of each year, the landlord provides an accounting of the actual costs and either credits the tenant for any overages
or invoices the tenant for any underpayments.
If a tenant pays net rent, the tenant pays its full pro-rata share of the real estate taxes.
Neither value added tax (VAT) nor Goods and Services Tax (GST) applies in the US.
Utilities
The tenant generally pays for electricity used in the premises, in one of the following ways:
United States
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Direct Meter: The tenant pays the utility company directly, based on an electric meter.
Submeter: The landlord buys electricity from the utility company and installs a meter to measure the tenants
usage. The tenant pays the landlord based on the meter, sometimes with a negotiable mark-up for the landlord.
Rent Inclusion: The tenant pays dollar amount per rentable square foot, sometimes called the electric rental
inclusion factor (ERIF), which may be negotiable and may be subject to inspection of usage by an electrical
engineer. The ERIF may be subject to future increases if electric rates charged to the landlord increases or the
tenants usage increases. Charges for above-standard electricity use, such as for data center space or for after
hours HVAC use, may be billed separately. In 2010, a typical ERIF for normal offce use ranged from USD
2.753.50 per square foot.
Security Deposits and Guarantees
The tenant normally provides security either as a cash deposit or letter of credit.
Tenants often negotiate with the landlord to keep the cash deposit in an escrow account. Interest on the cash security
deposit may accrue to the landlord or to the tenant, as negotiated. Typically, interest does not accrue to the tenant in
small leases.
The amount of the security is negotiable, and depends upon the landlords assessment of tenants creditworthiness,
the amount of the landlords outlay for tenant improvements, free rent, commissions, local market practices, etc. A
strong creditworthy tenant may pay 02 months rent as security. A startup company may pay 612 months rent or
more.
Parties often agree to a burn-down, which is a reduction over time of the amount of security the landlord holds, if the
tenant fulfls certain obligations of its lease.
Tenant Improvements
Landlord Work: Landlords may deliver new space in a raw or shell condition, generally with a main lobby
area, fnished restrooms on each foor, ceilings, air conditioning equipment, and sometimes interior partitions.
Landlords sometimes build out small spaces speculatively, as pre-builts, newly painted, carpeted, and ready to
occupy, although typically without furniture or telecom wiring.
Tenant Work: For offce installations over 10,000 sq. ft. and for smaller, specialized installations, the tenant
usually hires the architect and contractors, with the landlords reasonable approval. Some landlords require
pre-approved contractors and engineers. Landlords typically charge a fee to review design documents, but
tenants can often negotiate exclusions or limitation of these charges, especially for a standard or for an initial
installation. Landlords often contribute to the ft-out in some of the following ways:
- Tenant Improvement Allowance: Landlords can provide an allowance, typically expressed in USD per rentable
square foot. The tenant is responsible to pay tenant improvement costs that exceed the landlord allowance.
Tenant improvement allowances are often usable for design fees, but generally not for furniture and fxtures.
If actual costs exceed the amount of the allowance, the tenant pays the balance, or the landlord pays for all or
part of this overage, and amortizes the amount over the term of the lease at a predetermined interest rate.
- Workletter: For a small tenant, a landlord may offer a workletter, which is a written scope of work detailing the
tenant improvements that the landlord will construct and pay for.
- Build-to-Suit: Many landlords will design and construct the premises to the specifc needs of the tenant, espe-
cially for smaller installations.
Tenant Work Costs: Fit-out costs for Class A buildings in major cities normally range from USD 80160 per
square foot, including design, engineering, construction, data cabling, furniture, and other move-related
expenses. Construction costs and design fees are highest in New York, followed by Boston and San Francisco,
slightly lower in Chicago and Washington, and still lower in southern cities like Atlanta and Miami. Suburban
areas normally have lower construction costs than nearby urban centers.
Restoration
Restoration of the premises is negotiable, and may be limited to specifc items such as tenant-installed internal
stairways or to non-standard build-out.
United States
TRANSACTION COSTS
Tenants in the market will routinely engage a real estate service provider (broker) to represent them in site selection
and negotiations. Landlords (or sublandlords) typically pay leasing commissions to both their representative and the
tenants (or subtenants) broker.
Leases
- Methods of Calculation: A brokerage commission can be (1) A fxed percent of the total rent payable; as is
common throughout the US. (2) Based on a sliding scale with a higher rate paid on rent in the earlier years
than on subsequent years, the method used in Manhattan. (3) Based on the area leased. In San Francisco,
Chicago, Colorado, and Massachusetts, the commission calculation is based on the area leased, and typically
ranges from USD 1.001.50 per square foot per year.
- Payment Schedule: The owner may pay the entire commission immediately after the lease is fully executed, or
in installments, such as 50% at lease execution and 50% at lease commencement.
Subleases: Sublease commissions and formulas vary from market to market.
Legal Fees
The landlords lawyer typically prepares a frst draft of the lease and negotiates legal terms with the tenants lawyer.
Some large corporate users and government entities require the use of their standard lease document, and provide
the frst draft of the lease. Each party pays its own legal fees.
Because leases in the U.S. can be complex, legal fees tend to be higher than elsewhere.
General
Except in Washington, DC, laws that affect leases generally provide limited protection to commercial tenants; there-
fore, tenants rights must be addressed in the lease document.
Incentives are negotiable. They may include free rent, tenant improvement (ft-out) allowance, moving allowance,
assumption of tenants rent obligation in its prior lease, allowance for furniture, fxtures, etc. A large tenant may
negotiate for signage rights or the right to name a building.
Standard Lease Document
Standard (off-the-shelf) lease documents are rarely used. Landlords typically use their own lease documents. Large
corporate tenants frequently request use of their own commercial offce lease form, which often lengthens the review
of the lease agreement between the parties and their lawyers.
Right to Sublet
Subletting (subleasing) is the most common way for a tenant to dispose of unneeded space. Sublets have advantages
and disadvantages when compared with direct leases:
Advantages
- Rent is generally lower than rent for direct space offered by the landlord.
- Sublets can often include furniture, telephone systems, and cabling at no extra cost.
Disadvantages
- Most sublets have fxed terms, i.e., the remaining term of the current tenants lease. However, some sublessors
offer fexibility in the term, especially if they sublet a portion of the space they occupy, with the intention of
occupying the sublet space in the future.
- Subleases are riskier than direct leases because the sublandlord (also called overtenant or sublessor) may
default on rent payments, possibly giving the landlord the power to terminate the original lease and cancel the
sublease.
- The master lease, i.e., the lease between the landlord and tenant, often allows the landlord to recapture the
space prior to approving the sublease.
Conditions: The master lease provides for conditions under which a tenant may sublet.
United States
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- Typically, the landlord agrees not to unreasonably withhold or delay consent and allows the tenant to choose
its own broker to act as the sublease agent.
- The landlord usually retains the right to approve a subtenant, especially if the proposed subtenant is a com-
pany unrelated to the tenant.
- The lease may limit the number of subtenants that can occupy the space.
- The lease may exclude some or all of the following: specifc types of businesses, existing tenants, and tenants
that recently negotiated with the landlord directly.
- The landlord and the tenant negotiate as to which party will keep any profts over and above the original
rental rate. The landlord and the tenant often agree to share any such profts based on an agreed formula,
often on a 5050 basis. Profts are normally calculated typically net of subleasing costs. Profts are rare except
in strong markets.
Option to Expand and Right of First Refusal
An option to expand or a right of frst refusal may be negotiable, especially for large tenants. A right of frst refusal
gives the tenant the right to secure additional space that may come available during the term of the lease before it is
offered to a third party.
The lease may require the landlord to pay penalties. It may specify a date at which the tenant may terminate the lease
if the landlord does not deliver on time and in the condition agreed upon in the lease.
Holdover by Tenant
Holding over is the condition when the tenants lease has expired and the tenant remains in the space or has not met
its restoration obligations. This is a negotiable clause in the lease, which may require the tenant to (1) a premium
holdover rent, such as 125200% of the base rent during any holdover period, and (2) indemnify the landlord against
losses to the landlord due to the holdover.
Signage and Name of Building
Exterior signage may be negotiable.
Naming the building may be negotiable, especially for large long-term tenants.
General
Brokers and Agents: Tenants typically engage a tenant representative broker to represent their interests in site
selection and negotiations of a new real estate transaction and for most renewals. Landlords use in-house
employees or outside brokerage frms to market their space and represent them in negotiations.
Dual Agency: In some markets, large brokerage frms, like CBRE, may represent both the tenant and the
landlord in a transaction, with different individual brokers or brokerage teams representing each party, and with
proper disclosure. State real estate codes and laws usually stipulate the appropriate disclosure requirements.
Negotiating
- Negotiation of Business Terms: The tenants broker negotiates the business terms of the transaction with the
landlords agent. When both parties agree on the business terms, the tenants broker prepares a non-binding
term sheet, also known as a letter of intent, which outlines the business terms.
- Negotiation of Legal Terms: The landlords lawyer typically produces a draft lease agreement, which includes
agreed business terms, as outlined in the letter of intent, plus additional terms, known as legal terms. The
tenants lawyer negotiates the legal terms with the landlords lawyer.
- Lease Execution and Delivery of Documents: When both sides agree on all terms, the landlords lawyer
prepares execution copies of the lease agreement for signature by the parties. The tenant signs the lease, and
the tenants lawyer delivers it to the landlords lawyer along with a check for the frst months rent and the
agreed upon security deposit. The landlord countersigns the lease and returns a copy to the tenant.
United States
- If a Sublease: The subtenant and sublandlord follow the steps outlined above. In addition, the landlord reviews
the sublease documents and prepares a consent document for signature by subtenant, sublandlord, and
landlord.
Transparency
Lease and sales transaction data and other market information are available to tenants through leading brokerage
frms like CBRE. Professional real estate providers generally know the deal terms and landlord concessions of recent
completed deals, and are willing to share this information with clients they represent.
Class A: High-quality buildings with high-quality fnishes, state-of-the-art systems, and excellent accessibility. The very
best buildings are sometimes called A+ buildings or trophy buildings.
Class B: Average quality buildings with average rents. Building fnishes are fair to good. Systems are adequate.
Class C: Buildings of below-average quality and below-average rents.
CB Richard Ellis, USA
George Relyea
First Vice President
+1 212 984 7187
george.relyea@cbre.com
About CBRE USA: http://www.cbre.com/USA/
For CBRE USA Research: http://www.cbre.com/USA/Research/
United States
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MANHATTAN
BRONX
QUEENS JERSEY
CITY
HOBOKEN
LODI
TEANECK
RIDGEFIELD
NORTH
BERGEN
CARLSTADT
TETERBORO
SECAUCUS
Midtown
Downtown
MANHATTAN
Real estate practices are similar to practices elsewhere in the U.S., with exceptions outlined below.
SPACE MEASUREMENT
Defnitions
Usable Area: Manhattan landlords use the Real Estate Board of New York (REBNY) method, not the BOMA
method, to calculate usable area. Like other methods of measuring the usable area, the REBNY method excludes
penetrations such as shafts and exit stairs. However, the REBNY usable area measurements extend to the outside
of exterior building walls, and therefore include some un-usable space. The REBNY method can be confusing to
tenants, because standard restrooms are considered usable space when they are on single-tenant foors, but not
when on multi-tenant foors.
Rentable Area: Manhattan landlords generally calculate the rentable area by adding a percentage, the add-on
factor, to the usable area measured, and so the rentable area cannot be verifed by direct measurement. Over
the years, Manhattan landlords have repeatedly re-measured their buildings to increase rentable areas, simply
by increasing the add-on factor. Add-on factors vary slightly from one building to another. New buildings tend to
have slightly higher add-on factors and therefore higher loss factors than older buildings.
Loss Factors
Landlords agents sometimes quote loss factors between the REBNY usable area and the rentable area. Such loss
factors are typically at least 25% for full foor tenants, higher for divided foors. Loss factors are usually higher on
newer buildings than on older buildings.
OCCUPANCY COSTS
Rents
Rent Quoted: Landlords quote gross rents in U.S. dollars (USD) per rentable square foot per year. Manhattan
rents are generally the highest rents in the U.S.
Rent Payment: The tenant pays the frst months rent at lease or sublease execution, and subsequent rent pay-
ments monthly in advance.
Midtown
+1 212 984 8000
Downtown
+1 212 618 7000
CBRE OFFICES
Free rent: The landlord normally grants free rent to the tenant in the frst year of the lease, starting in the second
month because the tenant pays the frst months rent on lease execution. Free rent can apply to any month or
months during the entire term of the lease, as agreed, and as stipulated in the lease.
Porters Wage Escalation Formula: In addition to the methods used elsewhere (direct operating, CPI, annual
fxed increases or percentage increases), some Manhattan leases use a porters wage formula, which is unique
to New York City. Porters wage formulas calculate escalations using published hourly wage rate increases,
negotiated every three years, as part of the Commercial Building Agreement, negotiated by the Realty Advisory
Board on Labor Relations in New York City and the union that represents building employees. This agreement
establishes minimum wage rates for various categories of building employees in commercial buildings, including
a category defned as Other and informally known as porters. Common variations of this method are:
- Porters Wage Penny-for-Penny without Fringes: For every cent (USD .01) added to the published hourly wage,
a cent is added to the per-square-foot rent.
- Porters Wage Penny-for-Penny with Fringes: Same as above, but the wage used in this calculation includes
fringe benefts, which vary from building to building, and generally produces a steeper rent increase rate than
when calculated without fringe benefts.
- Porters Wage 3/4 Penny-for-Penny Without Fringes: With this formula, 3/4 of a cent is added to the rental rate
for each cent added to the hourly wage.
Occupancy Tax
Tenants that pay rent in excess of USD 249,999 per year may be subject to New York City Commercial Rent or
Occupancy Tax, based on the rent paid. Exemptions and credits may apply, depending on the rental rate and building
location.
Car Parking
Most Manhattan offce buildings have no parking spaces. Manhattan offce occupiers generally commute using an
excellent public transportation system of commuter trains, subways, and buses. Others use taxis, which cruise the
streets, day and night, looking for riders, and can stop to pick up passengers on almost any street. Those who com-
mute by car face high parking costs and heavy rush-hour traffc.
When available in offce buildings, parking spaces may be included in rent, or rented separately. Most drivers to
Manhattan park in separate parking garages, or occasionally outdoor parking lots that are available throughout
Manhattan.
Fit-Out Costs
Fit-out costs for Class A or Prime buildings normally range from USD 90200+ per sq. ft. including construction,
furniture, wiring, design fees, etc. Most Class A buildings in Manhattan require union labor, which is signifcantly more
expensive than non-union labor.
Tenants, especially small tenants, often reuse some or all of a previous tenants installation.
Other Occcupancy Costs
Some buildings charge extra for building security.
Many offce buildings are in Building Improvement Districts (BIDs) which provide, and charge for, extra services,
beyond those provided by the municipal government. Landlords normally pass on Building Improvement District (BID)
charges to tenants.
TRANSACTION COSTS
Brokerage Fees
If a transaction takes place, the landlord or sublandlord typically pays a full brokerage commission to the tenants or
subtenants broker. The landlord typically pays its broker one-half commission or less (called an override.) Brokers
who represent sublandlords normally receive an override of one-half commission.
Brokers that represent tenants and subtenants normally sign a commission agreement, provided by the landlords or
sublandlords broker, which establishes the conditions for payment, the terms, and the rates.
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New Leases and Subleases: A typical full commission is 5% of the frst years rent plus 4% of the second and third
years rents, plus a lower percentage for subsequent years. Commission rates vary slightly among landlords and
brokerage frms. The landlord or sublandlord sets the rates, which the tenants broker normally accepts without
negotiation.
Lease Renewal: Most established landlords pay the tenants broker a full commission to represent their tenant in
negotiations. This reduces the possible incentive for a broker to try to move the tenant to another building. Some
landlords pay the tenants broker a reduced commission for a renewal. The commission rates for renewals are
negotiable between the landlord and the tenants broker.
Holdover by Tenant
Leases typically require the tenant to pay 23 times the rent payable at the end of the lease, and sometimes, monetary
damages to a landlord caused by holdover.
Signage and Naming
Some landlords regulate tenant signs on multi-tenant foors through a signage program. Large tenants can some-
times negotiate naming rights for buildings.
General
Manhattan offce buildings tend to be older than elsewhere in the U.S. and many are renovated. Very little frst-
generation space is available. Virtually all new offce buildings in Manhattan are Class A buildings, because the high
cost of land and construction makes it uneconomical to develop lower grade offce buildings.
Class A: Full-service buildings, typically over 200,000 sq. ft. Most Class A buildings were built after World War
II. In these buildings, the landlord provides cleaning of the tenants premises; an attended lobby 24 hours a day,
seven days a week; and central air conditioning in warm months during business hours. Some buildings are air
conditioned for a half day on Saturdays. A few Class A buildings provide central air conditioning 24 hours a
day, seven days a week. Most Class A buildings have high security, including card-key access, visitor sign-in, and
tenant notifcation before visitors may enter into elevators, etc.
Class B: Generally built before World War II, and before central air conditioning became available. Class B
buildings typically have package air conditioning units that serve a single tenant. They have attended lobbies.
Cleaning is usually not included in rent.
Class C: Usually small pre-war buildings. Most have attended lobbies in which tenants share cost of a uniformed
guard. Cleaning is not included in rent.
CB Richard Ellis New York
George Relyea
First Vice President
+1 212 984 7187
george.relyea@cbre.com
About CBRE New York: http://www.cbre.com/USA/US/NY/New+York+Lex/
For CBRE Research: http://www.cbre.com/USA/US/NY/New+York+Lex/property/NYCMarketView.htm
Manhattan
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Buenos Aires
LEASE LENGTH
Term
Three to fve years is typical today for Class A space.
Termination
Tenants may terminate a lease unilaterally at any time with a 90-day notice, but landlords may not terminate during
the lease term. This situation causes landlords to prefer short leases and causes tenants to re-negotiate their leases
on a regular basis.
A tenant that terminates within the frst year of the lease must pay the landlord 1 months rent. A tenant that
terminates after the frst year pays one months rent.
These rights to terminate are in the law, and parties cannot waive them.
Renewal
A tenants option, including the renewal rent, is negotiable, not automatic.
SPACE MEASUREMENT
Net Lettable Area
Net lettable area is measured and quoted in square meters. The net lettable area generally includes carpetable area,
bathrooms, and common areas of exclusive use.
Effciency
A typical ratio of carpetable area to net lettable area in a Class A building in Buenos Aires is about 83%.
OCCUPANCY COSTS
Rent
Rental Rates: Please visit CBREs Global Knowledge Center: http://gkc3.cbre.com/search/search.aspx
Rent Quoted: Parties quote rent in U.S. dollars (USD), and operating expenses in Argentine pesos (ARS).
Buenos Aires
+54 11 4315 8845
ARGENTINA
CBRE OFFICE
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Rent Payable: The tenant pays monthly rent in advance; tenant pays operating expenses and property taxes
monthly in arrears.
VAT: The tenant pays 21% VAT on all rents, service charges, construction costs, furniture, and furnishings.
Free Rent: Landlords generally grant up to two months free rent; none in tight markets.
Rent Review: The lease typically specifes the rent review basis, usually an average of three market values pro-
vided by established real estate frms.
Costs normally included in the rent are:
- Car Parking: typically one space per 100 sqm in Buenos Aires; sometimes additional spaces in the suburbs.
- Repairs and replacements to building systems.
- Capital improvements.
- Building Insurance.
Service Charges
In a Class A building, the tenant typically pays a service charge of USD 5/sqm/month plus property tax. Items
normally covered in the service charges are:
Maintenance, repairs and cleaning of common areas.
Building management and staff, including building security staff.
Utilities for common areas.
Ordinary expenses, such as operation and maintenance of the building and common areas.
Structural repairs to the tenants premises.
Insurance for premises and its contents.
Water is included in the service charges.
Taxes
The tenant pays property taxes, in addition to service charges. The property tax varies from USD 0.502.00/sqm/
month in 2010 in Buenos Aires, and may be slightly lower elsewhere.
Utilities
Tenants contract and pay electricity directly to the utility company, based on actual metered consumption.
Water is included in the service charges.
Fit-Out
The landlord normally provides suspended ceilings, ceiling lighting and common area restrooms. The tenant normally
pays for all other ft-out costs. The landlord approves the tenants plans and specifcations. Fit-out costs for Class A or
Prime buildings in major cities normally range from USD 250500 per sqm including construction, furniture, wiring,
design fees, etc.
Restoration
Restoration of premises to its original condition upon lease termination is usually not required. Tenants tend to lease
properties in as-is condition, and return them in as-is condition.
Upon execution of a lease contract, the tenant pays two months rent as a security deposit. With very few exceptions,
the tenant pays this regardless of the tenants size or origin. The landlord repays it upon lease expiration, usually
without interest.
TRANSACTION COSTS
Agency Fees
New Lease: 5% of the total value of the lease contract for the whole duration of the contract; 3% for years
thereafter. When separate brokers represent landlord and tenant, typically each broker receives 50%.
Argentina
Sublease: 5% of total lease value; almost a non-existent transaction. When separate brokers represent landlord
and tenant, typically each broker receives 50%.
Lease Renewal: Tenant pays tenants broker 4% of total rent for renewed term.
Lease Termination: 20% of savings, but not less than one month of current lease, paid by the tenant.
Special Conditions: All transaction fees are subject to VAT, general sales tax or similar, as applicable. VAT at 21%
is additional to all agency fees.
Other Transaction Costs
Both parties split a one-time stamp duty of 0.5% of the total value of the lease.
No standard leases are used. Landlords provide the basic lease language which is negotiable.
Right to Sublet
Subleasing is rare, and the lease contract seldom covers it. It is occasionally possible to negotiate a right to sublease,
subject to the landlords prior written consent, and usually only to related parties. It makes more sense to terminate
than to sublease, because of the tenants right to terminate in Argentina.
Options to Expand
An option to expand is negotiable. A right of frst refusal is rarely granted.
Contracts rarely provide for this in advance in contract, unless timing is of the essence.
Holdover by Tenant
Holdover is rare, and payment is negotiable if holdover occurs; therefore, the lease contract should address this.
The right to name a building is negotiable in some buildings and can cost as much as the equivalent of the rental of
the entire highest foor.
By law, a tenant is in default after only two months of non-payment. The eviction process can take six months or more,
but is usually not a problem because of the lease termination rights.
General
About 50% of Class A buildings in Buenos Aires are condominiums. This has little effect on leasing, because most
condominium ownership is by investors, not occupiers. Ownership by domestic or foreign offce occupiers is rare.
A non-binding letter of intent between the tenant and the landlord precedes a fnal contract.
Transparency
Comparables that identify tenants, square meters, rents and incentives for recent transactions are generally available
for Buenos Aires.
Class A buildings generally have the latest standards of construction, raised foor, HVAC, safety and fre alarms,
foor plates larger than 400 sqm, and are in prime locations.
Class B buildings are older and do not comply with some requirements outlined above.
Class C buildings are lesser-quality buildings.
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CB Richard Ellis, Argentina
Ricardo Lzaro
Martillero Pblico
+54 11 4313 4500
rlazaro@cbre.com.ar
About CBRE Argentina: http:www.cbre.com/international/lac/argentina/buenosaires/
Argentina
LEASE LENGTH
Term
The lease term can be from one to ten years. Five years is typical.
Termination
As per the local legislation, the tenants have the right to terminate a lease agreement whenever necessary. Early
notice and penalties are negotiable; however, the law provides this formula for calculating termination penalties:
Months Rent Payable = Months Rent Penalty In Contract x -
Months Remaining
Months In Contract Term

For example, if the penalty fee in the contract is four months, and 30 months remain, and the contract term is 60
months:

Months Rent Payable = 4 x - = 2
30
60
Renewal
The law gives tenants with fve-year leases (not with shorter leases) the right to renew for fve more years if the tenant
has met its lease obligations, so leases of ten years or longer are unusual. Other rights to renew are negotiable.
By law, to renew a lease, the tenant must inform the landlord at least 180 days before lease termination. The
landlord and tenant can, although rarely do, agree to change this notice period, because the 180 days would still be
recognized in court.
VENEZUELA
URUGUAY
SURINAME
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GUYANA
FRENCH
GUIANA
ECUADOR
COLOMBIA
CHILE
BRAZIL
BOLIVIA
ARGENTINA
So Paulo
Rio de Janeiro
Rio de Janeiro
+55 21 2543 4345
So Paulo
+55 11 5185 4688 / 7964
BRAZIL
CBRE OFFICES
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SPACE MEASUREMENT
Defnitions
Landlords today normally quote a rentable area rather than usable area, especially for Class A and A+ spaces,
although no well-defned standard exists for measuring the rentable area. Nevertheless, BOMA guidelines are be-
coming a standard for triple A offce buildings.
Effciency
The ratio of carpetable area to the quoted rentable area varies.
OCCUPANCY COSTS
Rent
Rent Quoted: Rent is always quoted in Brazilian Reais (BRL) per month. Quoted rent usually includes some car
parking. The tenant pays for rent, services, utilities, and taxes separately.
Rent Payable: Rent is payable monthly in arrears. For example, usually, the tenant pays January rent on or
around February 5.
Free Rent: So Paulo and Rio de Janeiro tend to have the same rent-free concessions: 13 months is typical for a
5-year deal. Larger leases may include longer rent-free periods.
Rent Escalation: Rent is usually escalated based on a local infation index, known as IGPM (Indice Geral de
Preos valor de Mercado), which is applied annually to rent.
Rent Review: By statute, either party has a right to request a review of base rent and adjustment to market levels
every three years.
General Maintenance Costs
The tenant pays general maintenance costs; i.e., operating expenses, which range from BRL 1214 per sqm per
month in So Paulo and Rio de Janeiro. General maintenance costs include:
Cleaning, operating and maintenance costs for common areas.
Security: High crime rates, especially in large cities such as So Paulo, make good security systems important.
The building, not the tenant, normally provides security measures, although some tenants hire additional security
guards.
Taxes
The tenant pays IPTU rates (property tax) directly to the municipality. The standard rate is 1% per year of the value
assessed by the municipality, and varies currently from BRL 26/sqm/mo.
Utilities
The tenant pays for electrical services and other utilities directly to the servicing company.
Fit-Out
Landlord Work: In Rio de Janeiro and So Paulo, landlords usually deliver premises with modular ceiling,
lighting, and air conditioning equipment including ducts, except for triple A offce buildings that are normally
delivered core & shell.
Tenant Work: The tenant normally performs and pays for all further improvements, including additional
restrooms, subject to landlord approval. A condominium may restrict working hours. Brazilian law limits hours
for noise/heavy work in condominiums during workdays from 7:00am to 6:00pm, and on the weekend and
holidays from 7:00am to 8:00pm.
Fit-out Costs: Fit-out costs for Class A or Prime buildings in major cities normally range from BRL 13002800
per square meter, including construction, furniture, wiring, design fees, etc. Fit-out costs depreciate over the
lease term and are included as deductible expenses against taxable income.
Restoration
The lease usually specifes that the tenant must return the property to its original condition upon vacating the space,
unless the landlord accepts it in its current condition.
Brazil
A bank guarantee is the most common type of security deposit in Brazil. The average cost is 48% of the annual rental
value of the lease contract. The tenant must renew this every year.
Other Occupancy Costs
Cleaning: The tenant contracts this separately with no participation from the landlord.
TRANSACTION COSTS
Agency Fees
New Lease: Lease transaction fees for large transactions in 2010 vary from 13 months rent. Fees for smaller
leases tend to be higher. When an agent (i.e., broker or representative) represents the tenant, the tenant pays
this fee. When separate brokers represent the landlord and the tenant, both brokers receive amounts agreed
with each party; typically each representative receives 11 months rent for larger transactions; more for
smaller transactions. When the landlord uses a broker, the landlord pays his broker.
Sublease: No market practice exists because subleasing is rare, due to low early termination penalties.
Tenant Representative Fees: Fees in 2010 vary from 13 months rent, excluding discounts and rent free
periods, payable by the tenant upon signing of the lease agreement. Tenant representation is still rare. Smaller
assignments tend to have higher percentage fees.
All transaction fees are subject to applicable taxes (14.25%), generally equivalent to the concept of a VAT.
Legal Fees: The tenant and the landlord pay their own legal costs, typically based on an hourly rate.
Registration Fee: A one-time lease registration fee is necessary for a lease to be binding. Landlords sometimes
use the time between execution and registration to gain concessions after lease execution.
No other signifcant fees apply.
General
Brazilian tenancy law 8.245/91 regulates leasing rules and contracts.
Leases must be written in Portuguese and specifed in Brazilian Real.
Local lease legislation laws are extremely comprehensive in Brazil. As a result, most commercial leases are standardized.
Right to Sublet
The lease normally requires that the tenant obtain written consent from the landlord. In So Paulo, the sublease base
rent cannot, by law, exceed the going lease rate. In Rio, if the subtenancy rent is greater than the base rent, the tenant
(sublandlord) must pay the difference to the landlord.
Option to Expand
A right of frst refusal to lease space in a multi-tenanted building is negotiable when the same landlord owns other
spaces in the building.
When a tenant occupies an entire property and the landlord fnds a buyer, the law gives the tenant the right of frst
refusal to match offers by third parties, if the tenant had registered its lease with the Real Estate Registry at least six
months before the date the landlord begins marketing the property.
Penalties depend on the terms as agreed in the lease contract. For pre-leases, i.e., buildings under construction, the
parties normally negotiate late delivery penalties, which may vary from 14 days rent for every day of delay. Parties
may also negotiate a tenants right to terminate after 6 to 12 months of delay, with or without compensation from
the landlord.
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Holdover by Tenant
Once the lease contract has expired, the landlord may terminate the lease by prior notice to the tenant of at least 30
days. If the tenant does not leave the premises after this period, the landlord can fle an eviction in court.
Signage is usually permitted in hall and foor entrances. Large tenants can negotiate external signage and naming of
buildings, subject to some restrictions from the local legislation.
In So Paulo, the law regulates the dimension of outdoors according to location. Real estate companies may advertise
with signs not larger than one square meter. No similar regulation exists in other cities.
General
Brazil has a huge domestic market and is the only Latin American country with several major offce markets. So Paulo
is the business center of the country. Rio de Janeiro is an important administrative and commercial center. Brasilia, the
capital, was founded in 1960. Belo Horizonte and Curitiba have also evolved into important offce markets. CBRE has
an exclusive partner operating in Curitiba. In Belo Horizonte, CBRE has no exclusive local partner; however, CBRE is
frequently involved in Belo Horizonte through research, reports and transactions.
Condominium ownership is very common in So Paulo and Rio de Janeiro. More than 95% of the occupiers are
tenants, not owners. Large tenants often have separate leases with multiple owners in a single building.
Transparency
For So Paulo and Rio de Janeiro, comparables which identify tenants, square meters, rents, and incentives are
generally available for recent transactions, which CBRE updates monthly. For Belo Horizonte, Brasilia, Curitiba, and
Porto Alegre, CBRE updates similar data annually. For other major cities, CBRE also updates data annually.
Buildings are generally classifed as either AAA, A, B, or C based on criteria such as central air conditioning, foor
area, etc. Each specifcation has a different point count, and the total determines whether a building is AAA, A, B or C.
An AAA building needs, at minimum, central air conditioning, clear height of 2.80 meters or above, and foor area
of above 800 sqm.
Few buildings are now classifed, due to the relatively opaque market. However, CBRE is currently expanding the
number of buildings it classifes, and plans to create a publication explaining the classifcation system.
CB Richard Ellis, Brazil
Davi R. Lorenzo
Consultant, Global Corporate Services
+55 11 5185 4688
davi.lorenzo@cbre.com.br
Leandro Carmo
Consultant, Research Department
+55 11 5185 4688
leandro.carmo@cbre.com.br
About CBRE Brazil: http://www.cbrichardellis.com.br/
Brazil
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Santiago
LEASE LENGTH
Term
Leases can be of any length. Three to fve years is common. Five years is typical.
Termination
No automatic right to renew or terminate exists.
Renewal
An option to terminate is usually expensive.
SPACE MEASUREMENT
Rentable Area
The rentable area normally measures from the outside of the exterior wall of the building or the center of shared walls
within the building. It excludes common areas, access halls, vertical circulation, and shafts.
Effciency
A typical ratio of carpetable area to rentable area in a Class A building in Santiago is 85%.
OCCUPANCY COSTS
Rent
Currency: Parties normally quote rent in Unidad de Fomento (UF), an artifcial currency that adjusts daily to
infation, based on the change in the CPI from the previous month, so that its value remains constant. Most real
estate transactions: i.e., lease contracts, leasebacks and mortgage loans, use UFs. Parties rarely quote rent in
USD, as this would be disadvantageous to a tenant if the Chilean economy fails.
Rent Quoted Net: The landlord pays for structural repairs, property tax, and building insurance. The tenant pays
for rent, service charges, maintenance expenses (i.e., cleaning and minor repairs within the tenants space) and
Santiago
+562 562 2600
CHILE
CBRE OFFICE
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common area charges (also called operating costs, i.e., maintenance and repair of common areas outside of the
tenant space).
No Escalation: Because the UF system adjusts to infation, rents are not indexed. Revisions to market rent are
also very rare, except with long-term leases, which may provide reversion to market rent or fxed percentage
increases.
Rent Payable: The tenant pays rent in Chilean pesos (CLP), monthly in advance, at the then-current rate of UF.
Free Rent: Free rent is not typical, although one to two months (rent abatements) is sometimes negotiable.
Operating Costs
The tenant pays a pro rata share of common area charges, which covers building staffng, building security, and
building areas outside the tenants premises, such as elevators, hall, access, corridors, gardens, etc. For a Class A
building in Santiago, the average common area charge is USD 3.50/sqm/month, including electrical and water
usage of common areas.
Taxes
The landlord pays the property tax.
VAT sometimes applies to rent, depending on the landlords preferences and on negotiations with the tenant.
Generally, VAT is not applied to raw space, but is more applied to furnished space. VAT is usually recoverable.
Utilities
The term service charges is used for electricity, water and cleaning inside the tenants premises that the tenant pays
separately and directly to each provider. The tenant pays the electric and water companies directly, based on a meter
reading.
Tenant Improvements
Landlord Work: The landlord usually delivers an empty shell and may contribute with some improvements, such
as suspended ceilings with basic ceiling lighting, basic restrooms, and basic carpeting.
Tenant Work: The tenant usually performs and pays for all other tenant improvements, which are inexpensive
by U.S. standards. The tenant normally uses its own architects, engineers, and contractors, with prior landlord
approval. Landlords rarely charge fees to supervise or to review design documents.
Tenant Improvements Costs: Fit-out costs for Class A or Prime buildings in major cities normally range from USD
7001000 per sqm including construction, furniture, wiring, design fees, etc. VAT (19%) applies to ft-out costs.
Restoration
Parties negotiate restoration (i.e., reinstatement) and address it in the lease. Typically, ftted-out offces must be
restored to handover condition, but landlords usually allow improvements to open plan layouts to remain when they
beneft the landlord.
Top multinational tenants typically deposit one months rent. Smaller companies may deposit two months rent.
Security deposits are lower than in many other countries, because landlords do not generally do ft-outs or provide
other large incentives.
Car Parking: Tenants may negotiate car parking spaces in rent, but normally pay for them separately, particu-
larly if the tenant takes more than its allocation.
Cleaning: Tenants make their own arrangements to have the premises cleaned.
TRANSACTION COSTS
Agency Fees
Large companies tend to engage large brokerage frms like CBRE to represent them as tenants. Commonly, large
brokerage frms represent both sides, but it is rare for a single person to represent both sides.
Chile
Landlords normally work with agents but without exclusiveness and accept offers from any agent. However, when one
agent represents the landlord and another represents the tenant, both the landlord and the tenant contribute equally
to agents fees plus VAT. VAT is generally recoverable.
New Lease and Sublease: Total agency fees are 4% of the total value of the lease contract with a one-month rent
minimum. When the landlord and the tenant are represented by different brokers, the landlord pays its broker
2% and tenant pays its broker 2%. Occasionally a landlord or developer pays the total 4% fee to the broker or
brokers, to save the tenant money, as an incentive to close the deal.
Purchases: Typical fee is 4% of the purchase price and normally shared between buyer and seller. Fees are
divided as outlined above.
Legal Fees: Companies usually use their own lawyers or an external attorney to review and negotiate the legal
terms of a lease. The tenant pays legal fees when it uses an outside attorney.
Notary fees for signatures/validation are around 0.1% of the contract value. Notarization is optional in leasing
transactions, and mandatory for sales transactions. Legalized contracts provide greater protection. Typically,
large transactions are notarized.
Registration is recommended for leases, and is required for sales contracts. If a tenant registers a lease contract,
the obligation continues for the future owner. If a tenant fails to register a lease, the new owner could choose to
maintain the contract or not. In Santiago, the registration fee is 0.2% of the contract value.
General
All rules that determine the rights and obligations of tenants are included in the Civil Code (general dispositions) and
in the Special Law of Leasing, N19.866, last updated in March 2003.
Lease contracts are similar to one another, but no standard agreement or lease clauses exist.
Right to Sublet
The right to sublet or assign is negotiable, but most contracts do not allow subletting. When allowed, the tenant,
as sublandlord, normally must guarantee the subtenants rental payments and the landlord must consent to the
sublease.
Option to Expand
A frst refusal on additional space that becomes available is usually negotiable. This can be diffcult to accomplish
because most buildings are condominiums, and when additional space belongs to another landlord, a separate lease
agreement is needed.
Rarely a penalty is negotiated and covered in a lease. A reasonable penalty could be 10% of the monthly rent for
each day late.
Holdover by Tenant
Penalties for holdover after termination of the contract are negotiable, and are included in the lease contract. Typical
penalties are around 10% of the monthly rent for every day that the tenant holds over, which are payable in addition
to the regular rent.
The eviction process is lengthy.
Occupiers are permitted to place names in lobby directories at no cost. Exterior signage and naming of a building
may be negotiable.
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General
Licensing: Licensing does not exist for real estate brokers or agents. Many agents handle residential and small
offce assignments.
Condominium Ownership: With condominium ownership, brokers face a diffcult challenge to fnd offce space
for clients that need more than one foor or have special needs. Two foors can involve two landlords, two
contracts and two agents. Condominium ownership requires a committee to agree on decisions about improve-
ments, building image, building rules, etc. Condominium owners do not commonly coordinate their leasing by
using a single management company; however a good single property management service (for common areas
administration) is important for tenants.
Developers of new condominium buildings commonly secure multi-foor tenants with long-term leases, and then
sell foors individually to different investors. Since 2007, a few international investors have bought and owned
entire buildings (usually they buy Class A buildings, though occasionally class B+ buildings). However, owner-
occupiers have recently become rarer, mainly due to insuffcient offce space for sale. Therefore, occupiers who
want to own must build or buy a completed project. Many international occupants are too small to fully occupy a
Class A building, so international occupiers are starting to move towards owning class B+ areas.
Transparency
For Santiago, comparables that identify tenants, areas leased, rents, and incentives, are available for some recent
transactions.
Santiagos offce buildings are newer than in most other Latin American capitals. Many were built in the 1980s and
1990s. Between 2000 and 2010, Class A buildings rose 73%, from 940,000 to almost 1.62 million sqm, while
Class B buildings rose 62%, from 926,000 to 1.5 million sqm. In 2010, 156,000 sqm of Class A were entered as
new supply, the highest amount in a decade. About 200,000 sqm is already under construction, to be delivered in
20112013. Meanwhile, 100,000 sqm of Class B space will be delivered in 2010, and 127,000 sqm are under
construction.
Class A Buildings: Open plan, no tenants with spaces smaller than 300 sqm, no more than one or two occupi-
ers per foor, premium location and premium occupiers, high standards of security (vigilance and prevention
systems), centrally operated air conditioning, high-tech elevators, sprinklers, curtain walls minimum distance
between foor and ceiling of 2.60 m.
Class B Buildings: Generally, these are smaller buildings, with 50100 sqm tenants, without sprinklers or sophis-
ticated security systems. Most of them have air conditioner systems.
Some class A and B new buildings have LEED certifcation.
Unclassifed: These are buildings of quality inferior to Class B.
CB Richard Ellis, Chile
Paula Rodrguez
Manager Marketing, Research & Consulting
+ 562 562 2622
paula.rodriguez@cbre.com
About CBRE Chile: www.cbre.cl
For Local Market Reports in Spanish: http://www.cbrichardellis.cl/pdf/marketview-ofcinas.pdf
For Local Market Reports in English: http://gkc3.cbre.com/search/search.aspx
Chile
VENEZUELA
BRAZIL
PERU
ECUADOR
PANAMA
COLOMBIA
Bogot
LEASE LENGTH
Term
Lease terms can be of any length, but are generally at least three years for new space; fve years for corporate tenants.
Termination
A termination option is negotiable, and likely to incur a penalty.
Renewal
A right to renew is negotiable, subject to rent review (i.e., adjustment to market).
SPACE MEASUREMENT
Rentable Area
Rentable Area equals Usable Area. Floor areas measure, as in condominium business, to mid-wall of adjacent suites.
Internal partitions are included in rentable foor space. Shared hallways may or may not be included in the rental
charge.
Effciency
The rentable and usable areas are equal for all practical purposes.
OCCUPANCY COSTS
Rent
Rent Quoted: The currency is the Colombian peso (COP). Rent is generally quoted and contracted in COP/sqm/
month and is paid monthly in advance.
Free Rent: In most new buildings, a free rent period of up to three months allows time for build-out. In second-
generation space, less build-out work is usually required, and therefore the free rent period is shorter.
Rent Escalation: Rates are subject to annual review, per local cost of living index.
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Common Area Maintenance (CAM)
Leases are on a net basis. The tenant pays a contribution to Common Area Maintenance (CAM), typically equivalent
to USD 4.00/sqm/month for AAA buildings, either as a condominium association fee, or as a prorated allocation of
total building costs.
Taxes
The landlord typically pays property taxes. Tenants rarely pay for increases in property taxes.
Utilities
The tenant contracts for and pays for cleaning, utilities, and insurance separately with suppliers. Air conditioning
charges are extra when available, but mild temperatures in Bogot require minimal air conditioning. Most buildings,
including the best buildings in the market, do not have HVAC systems.
Tenant Improvements (Fit-Out)
Landlord Work: The landlord fully furnishes the common areas only.
Tenant Work: The tenant is usually responsible for all improvements, although the landlord sometimes
participates.
Tenant Improvements Costs: Fit-out costs for Class A or Prime buildings in major cities normally range from USD
200300/sqm including construction, furniture, wiring, design fees, etc.
Restoration
A tenant must restore the premises to its original condition, although landlords generally accept it as built.
A typical security deposit is one to three months gross rent, depending on the landlords assessment of the tenants
creditworthiness. Sometimes the landlord asks for a bank guarantee, for a letter of guarantee from the parent
company, or for an insurance policy.
Building security is included in CAM for multi-tenanted buildings.
TRANSACTION COSTS
Agency Fees
Normally, the landlord pays agency fees, although tenants are increasingly paying to be represented. All transaction
fees are subject to VAT, general sales tax or something similar.
New Lease: The agency fee for a one-year lease is one months rent. For leases longer than one year, a
typical agency fee is 5% of the total value of the lease contract for the frst fve years, 3% for years thereafter.
Co-brokerage (i.e., landlord and tenant represented by different brokers) is a normal practice, and the split is
5050. Clients represented by international frms are very likely to pay the tenants broker fees; however, tenants
never pay the landlords broker.
Sublease: 5% of total lease value. The sublessor pays a fee to the procuring agent (represented or not) and fees
are divided by co-brokers, when applicable, on a 5050 basis.
Lease Renewal: The tenant pays 4% of the total rent for the renewed term to the tenants broker.
Lease Termination: The tenant pays 20% of savings, no less than one month of current lease to the tenants
broker.
Legal Fees: Each party pays its legal counsel.
Registration: Typically, leases are not registered, although registration is possible at a cost of 1.7% of the lease
value, which is the entire amount of the rent to the end of the term. Tenants or landlords may register leases to
better ascertain rights in the event of a dispute.
Notarization: Leases may be notarized at 1.5% of the lease value. Tenants or landlords may notarize leases to
protect rights in the event of a dispute.
Colombia
General
The Colombian legal system is based on the French legal system. For real estate leasing, the civil code and the
commerce code apply.
Standard leases are not used in Colombia.
Right to Sublet
Negotiable.
Option to Expand
Negotiable.
Some leases include a penalty clause for late delivery.
Holdover by Tenant
Holdover by tenant is not negotiable and not addressed in the lease. If the tenant holds over, the law allows the
landlord to settle a demand in a court of law and to ask for compensation.
This is negotiable and addressed in the lease.
General
Condominium ownership is the dominant form of ownership in Bogot and other major cities. Occupiers generally
lease rather than own.
Transparency
A clear set of rules and customs exists, and real estate markets in Colombia, especially Bogot, are more transparent
than elsewhere in Latin America. However, comparables that identify tenants, areas and rents for recent transactions,
are not generally available.
Class AAA Buildings
- Often prominent buildings in key locations with good accessibility.
- High-quality of fnishes, use of expensive materials.
- State-of-the-art technical equipment (i.e., high speed elevators).
- Open plan lay-out, large areas per level (1,000 sqm minimum), 2.6 m minimum usable height per level,
suspended ceilings, individually controllable HVAC, fber optic cabling.
- Suffcient parking (minimum one space per 50 sqm).
- CCTV, 24-hour security, sprinklers in common areas.
- Often reduced running costs.
Class A Buildings
- Lay-out, technical and parking requirements same as AAA.
- Rarely landmark buildings, but often well-located with good access.
- Quality of fnishes and technical equipment are good, but not state-of-the-art.
- Class A buildings can be refurbished or technically upgraded older buildings.
- Modern out-of-town technical buildings (i.e., buildings used for call centers and service centers) can often be
classifed as Class A buildings.
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Class B Buildings
- Many are older than 10 years, with low to average quality of fnishes.
Contact for CB Richard Ellis
Robert Gilmore
Area Director, LAC
+1 305 779 3146
robert.gilmore@cbre.com

Colombia
UNITED STATES
GUATEMALA
MEXICO
BELIZE
HONDURAS
EL SALVADOR
Mexico City
Monterrey
Guadalajara
LEASE LENGTH
Term
Leases generally run from 35 years for small spaces; 510 years for larger spaces. Mexican legislation permits
leases up to 20 years. Leases are often shorter in second-generation space.
Termination
Early termination (break options) can sometimes be negotiated and included in the lease contract, generally with a
penalty.
Renewal
Renewal rights are common when rent is denominated in U.S. Dollars (USD), but rare when rent is denominated in
Mexican pesos (MXN).
SPACE MEASUREMENT
Rentable Area
Rentable area is measured in square meters. Landlords typically quote square meters according to the BOMA method
of calculating rentable area.
Effciency
A typical ratio of BOMA usable area to BOMA rentable area in Class A/A+ buildings in Mexico City is 8690%.
OCCUPANCY COSTS
Rent
Rent Quoted: Rent is quoted per square meter per month, either in U.S. dollars (USD) or in Mexican Pesos
(MXN).
Rent Payable: The tenant pays rent monthly in advance, usually in USD, sometimes in MXN. If the lease is quoted
in USD, tenant can pay in MXN at the exchange rate at the time of payment. The tenant pays VAT, called I.V.A.
(Impuesto al Valor Agregado) in Mexico. I.V.A. is 16% of the rent.
Mexico City
+5255 5284 0000
Monterrey
+52 81 8363 1822
Guadalajara
+52 33 3611 2083
MEXICO
CBRE OFFICES
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Grace Period: Up to three to four months grace period for ft-out is common. The grace period generally starts
at the signing date. Landlords rarely give free rent beyond the grace period, except in competitive transactions, a
landlord will give additional concessions, especially with large and credit-worthy tenants.
Rent Escalation: Peso-denominated rent adjusts annually by 100% of the offcial General Price Index. USD-
denominated rent adjusts annually by U.S. CPI, usually with caps.
Property tax and building insurance: These are included in the rent.
Operating Costs
A typical common area maintenance fee is about 10% of the rental rate. Operating expenses for Class A space vary
from USD 34/sqm/month. Building security is included in maintenance fees, although bank branches, money-
handling businesses, jewelers, and prominent individuals sometimes pay for extra security.
Utilities
The tenant pays for telephone and electricity.
Electrical Power: In offce buildings, electricity is generally delivered to foors at 110120 volts; two phase, 60 to
80 watts/sqm is typical in modern buildings. In older buildings, 3040 watts/sqm is typical. Tenants that need
220 volts obtain permission to install extra wiring. 440 volts is rare in offce buildings.
In Mexico City, Compaia de Luz y Fuerza del Centro provides electricity, and the tenant pays the Compaa
directly. The Compaa calculates cost and time for connection after the tenant submits electrical one-line dia-
grams and a request of budget. Connection time varies widely depending on the Compaas installed capacity,
and usually takes two months from submittal of a service request.
Modern buildings usually have adequate ready-to-go power for temporary (provisional) service, which takes
about four days to connect.
Landlord Work
- The landlord delivers space in any of the following conditions: (1) Most new buildings are delivered in obra
gris (shell) condition, with only service and common areas fully constructed. (2) Second-generation space is
normally delivered as-is. (3) In soft markets, landlords deliver space with up to a full landlord-paid ft-out.
- The landlord must provide a washroom area on every foor: typically one for men and one for women, de-
pending on foor size and other factors. The washroom generally adjoins an elevator bank or other common
areas. Private washrooms for individuals located within net leasable areas are considered tenant improve-
ments. Class A/A+ buildings typically have several columns with plumbing usable for private washrooms.
Tenant Work
- The tenant is usually responsible for ft-out, including suspended ceilings and ceiling lighting.
- The landlord normally allows the tenant to select the contractor, sometimes subject to landlord approval.
Landlords normally charge no fee to review drawings and specifcations, or for supervision.
- Landlords usually restrict work involving utilities, foor loading, and the exterior appearance of buildings. A/A+
tenant typically may not change windows or install illuminated signs visible from outside.
Tenant Improvements Costs: Costs for Class A/A+ or Prime buildings in major cities normally range from USD
450600 per square meter, including construction, wiring, design fees, etc. Furniture is additional.
Restoration
Tenants normally need not remove improvements when a tenant vacates, except for special construction, such as
internal stairs. The lease normally specifes what must be removed.
Landlords typically require a two-month deposit; the frst months rent, in advance; and a bond or a corporate
guarantee. This generally applies to all tenants.
Mexico
Parking: Most new buildings in Mexico City and Monterrey offer at least one parking space per 25 or 30 sqm of
rentable area, generally included in the rent. Additional parking spaces typically rent for approximately USD 100
per month.
Insurance: Tenants insure their premises separately.
TRANSACTION COSTS
The landlord normally pays all transaction fees, including VAT, general sales tax, or similar tax.
New Lease and Sublease: The landlord pays 5% percent of the total value of the lease contract for the frst fve
years, 2.5% for years thereafter up to 10 years. This is the total commission, which the landlord always pays
directly to the landlords representative broker. If another frm or broker is involved, this 5% is shared between
brokers, as negotiated between brokers.
Lease Renewal: Negotiable and typically 5% of the total rent for renewed term, but depending on market condi-
tions, can be a half commission or paid by the tenant.
Lease Termination: The tenant pays a negotiable commission or fee.
Purchase and Sale: The basic (i.e., market) fee is 5% of the sale price, adjusted according to the size of the
transaction.
Leases must be registered with government authorities. Either the landlord or tenant pays for registration.
General
Leases can be in English. An authorized translator must translate an English-language lease into Spanish before the
lease can be registered with government authorities. Double-column documents with leases formatted to include both
languages on the same document are common. These invariably include a clause that specifes the language (almost
always Spanish) that will prevail in any litigation.
Early termination is negotiable.
Landlords and tenants normally use standard lease forms.
Right to Sublet
The tenant usually negotiates a right to sublet or assign with the landlords consent. Some leases prohibit subleasing,
while others do not address it.
Option to Expand
The option to expand is typically available if a building has free space. It is negotiated case by case, and if agreed,
is included in the lease agreement. The parties can add a clause specifying that rent will be at market rate. A right of
frst refusal is common. Standard frst rights may be in a clause that gives the tenant 3060 days to exercise the right
if the landlord receives a lease offer from a third party.
Tenants customarily request a bail bond for late delivery of premises from the building developer or from the tenant
improvements contractor. This bail bond provides for expenses for an alternative temporary location.
Holdover by Tenant
Most leases provide that a tenant pays during the holdover period, 200300% of rent payable immediately prior to
lease expiration. The landlord typically deducts this rent from the security deposit.
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A tenant that leases at least 50% of a new building can usually negotiate with the owner for signage on the building
during occupancy. No laws limit signage or naming of buildings, not even in historic zones (propiedades protegidas)
or areas under government protection (catalogadas por el gobierno).
General
Mexico has increasingly adopted U.S. business practices, so it is common to see U.S. formatted contracts, agreements
and business structures and style, which has facilitated entry of U.S. investors.
Brokers need not be licensed in Mexico, so the quality of brokers varies greatly.
Transparency
Comparables, which identify tenants, square meters, and rents, are generally available for recent transactions in
Mexico City.
Grade A+ Buildings: The best, ultramodern landmark buildings, with the largest and most effcient foor plates,
best building control systems, and best architecture. Most were built since 2002 when standards and building
quality in Mexico began to rise dramatically.
Grade A Buildings: These were generally built from 1996 to 2000, with the technology available then, typically
with fber optics, and with extra capacity available from telephone vendors. Floor loading normally supports one
person per 10 sqm with furniture and fling cabinets.
Grade B and C Buildings: These have more outdated designs, effciencies and building systems.
CB Richard Ellis, Mexico
Luis Mendez
Montes Urales 470, 2
nd
Floor
Lomas de Chapultepec
Mexico City, DF 11000
Mexico
+52 55 5284.0000
lmendez@cbre.com
About CBRE Mexico: http://www.cbrichardellis.com.mx/
Mexico
COSTA
RICA
COLUMBIA
PANAMA
Panama City
Panama City
+50 7 210 1675
PANAMA
LEASE LENGTH
Term
Lease terms for any length are possible, but are usually for at least three years for new space. Five years is common
for corporate tenants.
Renewal
A right of renewal is negotiable, subject to rent review to market levels.
Termination
A termination option is negotiable in the lease and likely to incur a penalty.
SPACE MEASUREMENT
Defnitions
Rentable foor areas measure to mid-wall of adjacent suites and include the area occupied by internal partitions.
Shared hallways may or may not be included. Offce spaces are always measured the same way. Units for sale or
lease are legally registered with a specifc area.
Effciency
A typical ratio of carpetable area to rentable area in a Class A building in Panama City is 9095%.
OCCUPANCY COSTS
Rent
Rent Quoted: Leases are on a net basis. Generally, rent is quoted and contracted in Balboas (PAB) per square
meter per month. One PAB equals one U.S. dollar.
Rent Payable: The tenant pays rent monthly in advance, plus 7% ITBMS (Impuesto de Transferencia de Bienes
Muebles y Servicios), a sales tax on the transfer of personal property and services, equivalent or similar to VAT.
CBRE OFFICE
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Free Rent: A free rent period of up to three months is available in most new buildings to allow for build-out. In
second-generation space, build-out is usually less, and the free rent period is therefore shorter.
Rent Escalation: Rates are fxed unless the escalation is established in the contract. Escalations are usually 510%
per year after the second year.
Common Area Maintenance
The tenant pays a contribution to Common Area Maintenance (CAM), typically PAB 1.502.00/sqm, charged either
as a condominium association fee or as a prorated allocation of total building costs.
Taxes
Unless stated otherwise in the lease, the owner pays property taxes, including increases.
Utilities
The tenant contracts directly with suppliers of other services, such as cleaning, utilities, and insurance. Panama
temperatures require air-conditioning. The tenant pays the electric company directly, for electricity to operate the air
conditioning equipment based on a meter, unless the building has chiller towers, in which case, this cost is part of the
common area maintenance fee.
Fit-Out
In most leases, the landlord furnishes common areas only, and the tenant is responsible for all improvements.
Occasionally the landlord partially participates. Fit-out costs for Class A or Prime buildings in major cities normally
range from PAB 300700/sqm including construction, furniture, wiring, design fees, etc.
Panamanian law provides for a one-month security deposit for all commercial and residential leases, for all compa-
nies, domestic and foreign. A one-month deposit is common. One month is the amount specifed by law and must be
deposited at the government offce. However, a landlord is permitted to ask for a larger amount, which is negotiable.
Owners only ask for other guarantees for sale-leaseback contracts.
Restoration
Although negotiable in the lease, the tenant normally agrees to restore the premises to its original condition. However,
landlords are generally willing to take back an improved built-out space without requiring restoration.
Some parking is included in the rent, up to one space per 3050 sqm of leasable space. Additional parking may be
available at around PAB 50100 per unit per month.
TRANSACTION COSTS
Agency Fees
Normally, the landlord pays agency fees, although tenants are increasingly paying to be represented. All transaction
fees are subject to ITBMS. If separate brokers represent the parties, parties generally divide the fees shown below on
a 5050 basis.
New Lease: For a one-year lease, agency fees equal one months rent. For leases of more than one year, agency
fees are 5% of the total value of the lease contract for the frst fve years, 3% for years thereafter. Agency fees are
mostly paid by the landlord, who will pay 100% to his broker, or 5050 to each broker. The tenant rarely pays its
broker.
Sublease: The landlord pays 5% of the total lease value and fees are negotiable downward. Subleases are very
rare. When they occur, the tenant (i.e., the sublandlord) pays the fee.
Lease Renewal: The tenant pays 5% of the total rent for the renewed term.
Lease Termination: The tenant pays 20% of savings, no less than one month of the current lease. A lease termi-
nation is rare.
Purchase and Sale: The seller pays 35% of the price adjusted according to the size of the transaction. If sepa-
rate brokers represent buyer and seller they share the commission, sometimes 50%50%.
Panama
Legal Fees
Each party pays its legal counsel.
Notary and registry fees: The landlord or seller pays them.
Registration and other related fees for purchases amount to 23% of the transaction value.
General
Civil Code: The Codigo Civil, Ley de Arrendamiento, covers the rights and responsibilities for tenants and land-
lords. Rights and responsibilities for commercial tenants differ from those of residential tenants.
Lease Registration with the Leases Department of the Ministry of Housing: Most landlords register their leases in
order to protect themselves. Otherwise, it is diffcult to evict a non-paying tenant. Also, a tenant may claim to be
the possessor, and dispute the owners rights. Lease registration defnes the relationship and role of each party,
and facilitates the process of contract terminations if the tenant defaults. Registration is free, but the tenant must
have paid the security deposit before a lease can be registered. Courts recognize lease contracts even if they are
not registered with the government. The lease department of the Ministry of Housing may issue a brief standard
contract, to ensure that all legal relevant matters are covered.
Lease Registration at the Public Registry of Property (EARP) protects tenants when a lease provides an option to
buy. Leases without an option to buy are rarely registered at the Public Registry of Property because parties often
want lease terms to be kept confdential, whereas this registration makes lease terms available to the general
public. According to the law, the landlord is responsible for registration, which must be notarized, even though it
protects the tenant as the holder of the frst right of purchase.
Each lease is specifc. No standard lease form exists.
Right to Sublet
Subletting is rare, but is negotiable and can be addressed in the lease. Landlords normally reserve the right to ap-
prove the sublease.
Option to Expand
An option to expand is negotiable in the lease.
Penalties for late delivery by landlord are negotiated and addressed in the lease.
Holdover by Tenant
Penalties for holdover by a tenant may be negotiated or addressed in the lease.
Exterior signage and naming of a building may be negotiable and addressed in the lease.
OFFICE REAL ESTATE MARKETS
General
As of late 2010, the Panama commercial real estate market is competitive and growing at an unprecedented pace.
Some new offce projects are underway, which will be absorbed due to growing demand.
Condominium ownership is the prevalent system. All Class A buildings are condominiums, and about 99% of offce
buildings built since the 1980s are condominiums as well. About 50% of high-quality offce occupiers own their
condominium space, and about half lease their space. The present trend leans more toward leasing than to buying.
Most foreign companies lease rather than buy.
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Transparency
Comparables that identify tenants, areas, and prices for recent sales transactions are available. However, such
comparables are diffcult to obtain for leases.
No commonly accepted way to classify buildings exists in Panama. However, CBRE classifes buildings as Class A,
Class B, and Class C.
CB Richard Ellis, Panama
Carla M. Lopez
Director of Valuation & Advisory, Panama
+50 7 210 1675
clopez@cbre.com.pa
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Lima
LEASE LENGTH
Term
Three to fve years is most common. Shorter or longer leases are possible.
Termination
Early contract termination by the tenant is usually subject to a penalty payment and is regularly included in the lease
agreement.
Renewal
A tenants right to renew should be established in the lease contract.
SPACE MEASUREMENT
Net Rentable Area
Net rentable area in square meters is generally quoted for leases. This includes carpeted area plus an allocation of
common areas on the foor. Buildings and their common areas tend to be small. In 2010, the highest Class A building
has 23 foors.
Effciency
The loss factor in a Class A building in Lima is 0% because the net rentable area that the landlord quotes equals the
carpetable area.
OCCUPANCY COSTS
Rent
Quoted: Rent is quoted net in U.S. dollars (USD) per square meter per month.
Rent Payable: Usually in USD or in local currency at an agreed value. Maintenance charges are additional.
Lima
+511 222 7914
PERU
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Free Rent: Tenants normally negotiate a rent-free period of up to three months for ft-out in new spaces.
However in 2010, due to a shortage of Class A and A+ space, one month of free rent was typical for spaces
between 200 and 400 sqm and two months for larger spaces.
Escalation: Rent adjusts annually by the U.S. Consumer Price Index or applying a 3% rate, whichever is higher.
Common Area Maintenance Fee
A Common Area Maintenance fee, typically 1315% of the rental rate, is added to rent.
Taxes
Property taxes and tax escalations are included in the rent.
Utilities
The tenant pays directly for telephone, electrical costs, cleaning services and other utilities. Some Class A buildings
charge additional fees for the use of central air conditioning.
The tenant is generally responsible for all improvements. A landlord contribution to ft-out is negotiable, and usually
minimal. Fit-out costs for Class A or Prime buildings in Lima normally range from USD 450750 per sqm including
construction, furniture, wiring, etc. Design fees are additional.
A security deposit of three months rent is typical, as is a letter of credit or bank guarantee or cash security deposit.
Letter of Credit: An obligation that a bank takes on to make a payment once certain criteria are met. Once
these terms are completed and confrmed, the bank will transfer the funds. This ensures payment as long as the
services are performed.
Bank Guarantee: Like a line of credit, it guarantees a sum of money to a benefciary. Unlike a line of credit, the
sum is paid only if the opposing party does not fulfll the stipulated obligations under the contract. This can be
used to insure a buyer or seller from loss or damage due to nonperformance by the other party in a contract.
Restoration
In general, a tenant must restore space to its original condition, although this is negotiable. When new space is
occupied for the frst time, the landlord typically accepts tenant improvements. The lease specifes whether the tenant
must restore the space, and may state that the landlord will not pay for the improvements that are left behind.
Municipal Taxes: The tenant pays for municipal taxes related to community services such as street lighting, street
security, maintenance, etc.
Car Parking: Parking spaces are not usually included in the rent, and are negotiated separately.
TRANSACTION COSTS
Agency Fees
Normally, the landlord pays agency fees. If two agents are involved, the agents agree on a split. All fees are subject
to sales tax.
New Lease: 35% of the total value of the lease or sublease, but no less than one months rent. If different
brokers represent the landlord and the tenant, the landlords broker receives the fee and shares it with the ten-
ants broker. The landlord normally pays the fees to both agents, unless the tenant has agreed to pay its agent.
If the landlord does not pay the tenants agent or pays the agent partially, the tenant normally must cover the fee
or pay the difference so that the tenants agent receives 33.5%.
Sublease: Agency fees are the same as in a new lease, although subleasing is rare.
Terminations, Expansions and Renegotiations: Usually 35% of total contract value.
Peru
General
Title VI of the Civil Code governs commercial real estate leases.
There are no standard leases in Peru.
Right to Sublet
Subleasing is unusual and only permitted to companies related to the original company if negotiated in advance and
noted in the lease.
Option to Expand
The possibility of an expansion of the lease is always addressed in the lease if allowed.
Penalties for late delivery are established in the lease contract.
Holdover by Tenant
Penalties for late delivery are established in the lease contract. Generally the tenant would have to pay 150% of the
regular rent. The landlord also has the right to sue the tenant.
Faade signage may be negotiable if a tenant occupies a signifcant percentage of the building. For faade signage,
the tenant typically pays monthly for the space that the signage occupies and pays all other related costs (license from
local government, production, installation, maintenance, and removal).
A building name cannot be changed.
General
In 20072008, several buildings were under construction, due to the shortage of Class A and A+ spaces. Absorption
slowed in 2008 in the aftermath of the global credit crunch. Class B buildings were able to increase their rates when
Class A and A+ buildings were needed.
In 2009, with Class A supply again available, lease rates were standardizing.
In 2010, lease rates standardized due to a slight increase in the average vacancy rate. Investors and developers
found it necessary to continue with projects as companies recovered confdence in the local market, helped by the
good national economy.
Transparency
Comparables for Lima including information on rents, tenants, etc., for recent transactions are generally not available.
In 2010, only Lima had major offce buildings. However, this classifcation generally applies to Lima and elsewhere.
Class A+ or AAA: The terms A+ and AAA have the same meaning.
- Location: Highest level of access and urban services.
- Floor-to-Floor Height: Equal to or greater than 3.20 m.
- Common Areas: Conference Rooms are available for use by all tenants in the building. A suppliers payment
counter is provided with an entrance separate from main building lobby. Many A+ buildings have a cafeteria
for use by all tenants.
- Frame: Column spacing at least 8m x 8m to allow for open plan layout.
- Building System: Reinforced concrete. Steel frame buildings are rare in Lima.
- Exterior Curtain Wall: Insulated with solar control laminates.
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- Electrical Installations: Programmable energy control system to adjust lighting levels to control energy usage.
Trays in the false (i.e., suspended) ceilings to conduct wires.
- Energy Backup: Power generators for corridors and evacuation routes and, in some cases, for elevators.
Tenants receive a small quantity of backup energy, normally for corridors and IT areas (servers). The building
also has a transformer panel that switches the energy source to the power generator when needed as well as
tenant-controlled generators for use in case of a blackout.
- Sanitary Installations: Water meter and fush valve toilets that minimize excess water usage.
- AC System: Central system.
- Fire Detection System: Required in the whole building. System is prepared to incorporate leased areas.
- Portable Equipment for Fire Fighting: This is provided in common areas.
- Water System for Fire Fighting: Required in the whole building. System prepared to incorporate sprinklers and
hose outlets in leased areas, so that tenants can install the sprinklers as part of the ft-out.
- Pressurized Evacuation Stairs.
- Elevators: Automated system with high-capacity (typically 10-person) high-speed, high-fnish elevators.
Class A
- Location: High level of access and urban services.
- Common Areas: Conference rooms, suppliers payment counters, cafeterias.
- Frame: Column spacing at least 6m x 6m.
- Building System: Reinforced concrete.
- Exterior Curtain Wall: Insulated with solar-control laminates.
- Electrical Installations: Automatically integrated systems that are less sophisticated than in Class A+ buildings.
Motion detectors to turn lighting on and off. Trays are the same as in Class A+ buildings.
- Energy Backup: Generators for common areas and transformers.
- Sanitary Installations: Flush tank toilets.
- AC System: Central system.
- Fire Detection System: Required in the whole building. System is prepared to incorporate leased areas.
- Portable Equipment for Fire Fighting.
- Water System for Fire Fighting: Required in the whole building. System is prepared to incorporate leased
areas, so that tenants can install the sprinklers as part of the ft-out.
- Elevators: High-capacity (ten passengers), speed and fnishes.
Class B: Most Class B buildings were built as offce buildings.
- Location: Acceptable level of access to main and secondary streets.
- Common Areas: Lobby but generally no shared conference rooms or cafeteria.
- Structural Frame: Column spacing at least 4m x 4m.
- Building System: Reinforced concrete or load-bearing walls.
- Exterior Curtain Wall: Low-cost exterior curtain walls.
- Electrical Installations: Conventional non-automatic system. Wires are distributed in the false ceiling along
trays or through walls.
- Energy Backup: Manual transfer panel to switch the electricity source to the buildings generator in case of a
blackout.
Peru
- Sanitary Installations: Flush tank toilets.
- AC System: Single units.
- Fire Detection System: In common areas and parking area. Sometimes ready-to-integrate leased areas.
- Portable Equipment for Fire Fighting.
- Water System for Fire Fighting: In common areas and parking area. Sometimes ready-to-integrate leased
areas.
- Elevators: Capacity up to eight passengers. Average fnishes.
Class C: Most Class C buildings were built as residences and converted to offce use.
- Location: Low level of access; location on secondary street.
- Common Areas: Lobby but no shared cafeteria or conference rooms.
- Structural Frame: Open offce layout is limited by short spans between columns and walls.
- Building System: Reinforced Concrete System or load-bearing walls.
- No exterior curtain wall.
- Electrical Installations: Not automatic system. Conventional channeling or recessed trays. Wires are distributed
in the false ceiling or through walls.
- No energy backup.
- Sanitary Installations: Water tank for daily use only, not suffcient for frefghting.
- No AC system.
- No fre detection system.
- Portable equipment for fre fghting.
- No water system for fre fghting.
- No pressurized evacuation stairs.
- Elevators: Capacity up to six to eight passengers, average fnishes.
Transfer Tax
The buyer pays a transfer tax (Alcabala) for property transactions. This tax represents 3% of the assessed value of
property.
Agency Fees
Agency fees are 35% of the transaction value. Normally only the seller pays fees. The buyer pays his agent if the
sellers agent refuses to share the fee.
CB Richard Ellis, Peru
Carol Galarza
Marketing & Research
+ 511 222 7914
carol.galarza@cbre.com.pe
About CBRE Peru: http://cbre.com.pe/
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Caracas
Puerto La Cruz
COLOMBIA
BRAZIL
GUYANA
VENEZUELA
MARTINIQUE
(FR.)
GRENADA
TRINIDAD
AND
TOBAGO
BARBADOS
SAINT LUCIA
SAINT VINCENT AND
THE GRENADINES
ARUBA
(NETH.)
NETHERLANDS
ANTILLES
(NETH.) Caracas
+58 212 285 2831
Puerto La Cruz
+58 281 287 2121
LEASE LENGTH
Term
Leases for three years are most common although shorter and longer leases are possible.
Renewal
Options to renew are negotiable, subject to rent review to market levels.
Termination
Options to terminate are negotiable and addressed in the lease, often with a penalty.
SPACE MEASUREMENT
Net Lettable Area
Net lettable area in square meters is generally quoted and rented. Restrooms are included in the net lettable area
only when they are located inside the offce space. Circulation space located outside the tenants space is excluded
from lettable area.
Effciency
A typical ratio of carpetable area to net lettable area in a Class A building in Caracas is 8590%.
OCCUPANCY COSTS
Rent
Currency: Rents are established and paid in Bolivares Fuertes (Strong Bolvar= VEB= BS.F). In August 2008, the
Bolvar Fuerte (VEF) replaced the old Bolvar (VEB) at the rate of one Bolvar Fuerte per 1,000 Bolivares.
Free Rent: In new buildings, the free rent period depends on the lease term; however, up to three months for
build-out is typical. In built-out second-generation space, the free rent period depends on the delivery condition
of the space and on the lease term.
VENEZUELA
CBRE OFFICES
Car Parking Included in Rent: When available, parking spaces are normally included in the rent, and additional
spaces are at an additional cost.
Rent Reviews: It is common for rent reviews to occur every six months because the infation rate in 2009 and
2010 has ranged from 2030%. Although higher than in 2009, vacancy rates (4.53% at the end of 3Q10) in
Caracas remained low in 2010, with a shortage of offce space.
Operating Costs
Leases are on a net basis. The tenant usually contributes to Common Area Maintenance (CAM), typically VEF 1216/
sqm/month in Class A buildings, either as a condominium association fee or as a prorated allocation of total building
common area costs.
The cost of central air conditioning, if available, may be part of CAM or charged separately.
Taxes
The landlord pays property taxes and does not recover them through service charges or otherwise. The landlord does
not pass property tax increases to the tenant.
Utilities
Tenant pays supplier directly, according to usage, for telephone, electrical and other utilities. Water is paid through
Common Area Expenses.
Landlords Work: The landlord or developer normally fully furnishes only common areas. The tenant is respon-
sible for all improvements to its premises. The landlord seldom participates in tenant improvements. Offces
in new buildings are delivered in obra gris (grey fnishing) condition, which means shell, i.e., with no foor or
ceiling fnishing. Only common areas are fully equipped.
Tenants Work: The tenant is responsible for all improvements to its premises. The landlord sometimes (however
rarely) participates in tenant improvements.
Cost of Tenants Work: Class A or Prime buildings in major cities normally range from VEF 17502000/sqm
including construction, wiring, design fees, etc., excluding furniture.
Three months net rent is typical.
Restoration
A tenant must be prepared to restore space to its original condition, but landlords usually accept built-out space
without restoration. Occasionally a tenant can negotiate a lease that allows the tenant to vacate without restoring.
The tenant pays for cleaning, insurance, and security, as applicable.
TRANSACTION COSTS
Agency Fees
Normally, the landlord pays agency fees. If two agents are involved, they agree on a split of fees outlined below. If a
tenant retains an agent, the tenant usually pays its agent. All lease transaction fees are subject to VAT.
In lease transactions, agents do not split fees. Fee splits apply only to sale transactions.
New Lease: For a one-year lease, the fee is one months rent. For leases of more than one year, the fee is up to
5% of the total value of the lease contract for the frst fve years, up to 3% for years thereafter. When the landlord
and the tenant are represented by different brokers, both brokers may or may not receive amounts shown above
depending on the arrangements that each broker makes with its client.
Sublease: Up to 5% of total sublease value. If sublessor and subtenant are represented by separate brokers, both
brokers may or may not receive amounts shown above depending on the arrangements that each broker makes
with its client.
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Lease Renewal: Up to 4% of total rent for renewed term; the minimum fee being the equivalent to 21 days rent
for one-year term renewals.
Lease Termination: When the tenant hires an agent to assist in getting a lease terminated, the fee is negotiable.
It can be a lump sum or a percentage of the savings. For example, it can be 20% of savings, but not less than
one month of current lease.
The tenant pays legal fees, notarys offce registration fees, and stamp duty. Stamp duty on a lease is minimal.
General
Leases are governed by Tenants Law. This law regulates adjustments issues, legal extension rights for tenants and
maximum guaranty, etc.
The law requires some standard clauses in every lease, such as warranties, legal extension rights, and payment
currency. Parties agree on other clauses, such as lease term, repairs, sublease, penalties, CAM costs, etc.
Right to Sublet
Subletting is rarely allowed. If it is allowed, the specifc terms are agreed upon and addressed in the lease contract.
Option to Expand
Negotiable but rare. If agreed to, it is addressed in the lease.
Late delivery is rare. If it occurs, the tenant can break the lease and force the landlord to pay a penalty that was
agreed upon in advance and established in the lease contract.
Holdover by Tenant
If the tenant holds over, the penalty is calculated on a daily basis rate and is usually much higher than the amount
paid during the lease. The increased amount is previously agreed to between the parties and is addressed in the
lease.
Negotiable and payable by tenant. This does not necessarily have to be addressed in the lease, although it can be
addressed in a different formal agreement.
OFFICE LEASING MARKET
General
Condominium ownership is common in the Venezuelan market. Most offce buildings are sold to multiple buyers,
therefore it is common for a tenant who needs more than one offce unit to negotiate with more than one owner.
Transparency
For Caracas, comparables that identify tenants, square meters, rents and incentives for recent transactions, are rarely
available. Lease contracts can be signed in a notary offce located anywhere and are almost impossible to track.
Buildings in Venezuela are classifed as either Class AAA, AA, A, Class B or B, or Class C. International occupiers
generally occupy Class AAA, AA, or A buildings. These are located in premium sectors, have a corporate image,
large foors (min. 700 sqm), access control, excellent maintenance, availability of support services, etc.
PURCHASE AND SALES
Ownership by occupiers is common in Venezuela. Many corporations choose to own instead of lease, to protect
against infation in Venezuela.
Venezuela
Agency Fees
A basic fee ranges from 35%, and is negotiable, depending on sale price and on the feasibility of disposition. For
example, if a property is likely to sell quickly, the fee can be in the lower part of the range. If the property value is low,
the fee can be at the high end.
The common practice is that the seller pays the fees and both agents split it; however, sometimes the purchaser pays
the fee to its agent, in order to avoid a confict of interest. Under these circumstances, the purchaser pays 3% or less,
and the seller pays a fee as agreed with sellers agent.
The buyer pays the government 1% of the value of the transaction and all legal costs related to the transaction (at
notary and regisary offce) including registration expenses (registration taxes, document drafting, etc.).
The seller pays the government a capital gains tax of 36% of the capital gain on the sale, indexed. Of this tax, 0.5%
of the sale price is due to the government immediately before the signature of the sale document. The remainder of
the capital gains tax is due with the tax statement of the corresponding year.
The seller also pays solvencies emissions; i.e., the sellers pro rata share of the property tax, energy bill, water
service, and condominium association fees, that apply to the portion of the billing period during which the seller
owned the property.
CBRE Richard Ellis, Venezuela
Vilma Daz
Brokerage Services Director
+58 212 285 7918/ 285 2831
vilma.diaz@cbre.com
About CBRE Venezuela: www.cbre.com.ve
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Austria ............................... 52
Bahrain ............................... 56
Belgium ............................. 59
Czech Republic ................... 63
Denmark ............................ 67
Finland .............................. 71
France ............................... 75
Germany ........................... 81
Ghana ................................ 86
Greece ............................... 90
Hungary ............................. 95
Ireland ............................... 99
Israel ............................... 104
Italy ................................. 108
Kazakhstan ....................... 112
Luxembourg ...................... 118
Morocco ........................... 122
Netherlands ..................... 125
Norway ............................ 129
Poland ............................. 132
Portugal ........................... 136
Romania .......................... 140
Russia .............................. 145
Serbia .............................. 152
Slovakia ............................ 155
Spain ............................... 159
Sweden ............................ 164
Switzerland ....................... 167
Turkey .............................. 171
Ukraine ............................ 174
United Arab Emirates ....... 179
United Kingdom ............... 185
Vienna
+43 1 533 40 80
AUSTRIA
SWITZ.
SLOVENIA
SAN MARINO
POLAND
NETH.
MONACO
LUX.
LIECH.
ITALY
GERMANY
CZECH REP.
CROATIA
BOSNIA
& HERZ.
AUSTRIA
Vienna
LEASE LENGTH
Term
Commercial leases run for an indefnite period (Unbefristet) or for a limited number of years (Befristet); both are com-
mon, however most, perhaps 80%, of todays signed contracts are limited. International occupiers and international
investors are more comfortable with limited contracts.
Indefnite (Unbefristet): The landlord cannot terminate a lease unless the tenant is in default. The tenant gives a
waiver, by which the tenant agrees to be bound to the lease for a fxed period of time (Kndigungsverzicht). The
tenants right to break applies only after the end of the waiver and within the notice period.
Limited (Befristet): Leases can be of any length, and no law exists to limit the length. Three to seven years is
typical. For Befristet lease contracts, the tenants right to break does not apply. The tenant must pay the rent and
service charges for the remaining lease term unless the tenant fnds a new tenant, acceptable to the landlord, to
take the space, either as a direct tenant with the landlord or as a subtenant.
Renewal
The tenant has a right of renewal only if stipulated in the lease.
SPACE MEASUREMENT
Net Internal Area
Offce measurements are on Net Internal Area, known as Nettogrundrissfche (NGF), which includes kitchens and
restrooms, internal walls and circulation space, but excludes vertical penetrations and structural walls.
Effciency
A typical ratio of carpetable area to net internal area in a Class A building in Vienna is 9295%.
OCCUPANCY COSTS
Rent
Recent Rental Rates: Visit CBRE Global Knowledge Center: http://gkc3.cbre.com/search/search.aspx
CBRE OFFICES
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Rents Quoted: Rents are normally quoted in EUR/sqm/month. Service charges and property taxes as part of the
service charges are additional. Rent, together with the service charge, is payable monthly in advance. Double
net leases are typical. These are leases with core and shell maintained by the landlord, and other repairs paid by
the tenant through service charges.
Free Rent: Landlords grant free rent periods of 13 months for the ft-out period. Up to one month rent free per
year is within the market standard and can be consumed as free rent or ft out costs.
Rent Escalation: Rent increases are negotiable and may be linked to consumer price index (CPI) and adjusted
annually. Leases are common with increases at 100% CPI annually indexed. Or they may be linked to CPI and
adjusted when CPI increases by an agreed amount, such as 5%.
Repairs: The landlord is normally responsible for structural repairs and external repairs. In multi-let buildings,
the landlord is responsible for major repairs to common areas. The cost is generally not recoverable from the
tenant.
Service Charges
The tenant pays service charges. For a Class A offce, space service charges are generally about EUR 2.54.0 per
square meter per month, depending on costs including heating and cooling, and in offce towers between EUR
3.55.0 per square meter per month.
Service charges typically include:
Insurance: The landlord normally pays for building insurance and recovers its cost from the tenant through
service charges.
Electricity for the common areas for lighting.
Running costs and maintenance costs for lifts, cooling machines, etc.
Heating and Cooling: The tenant pays for heating and cooling through service charges or separately.
Security and Reception: If the landlord provides security and reception, service costs are higher. In general, only
offce towers have reception on the ground foor. Some exceptions exist for newly built Class A buildings.
Building Security: Building security charges are usually part of the service charges. However, extra charges for
building security can range from EUR 0.51.0 per square meter per month. Building security applies mostly to
towers, where service charges are always higher than in standard offce buildings.
Property Tax: By law, this is a service charge.
Taxes
Value Added Tax (VAT): VAT at 20% is payable on rent, service charges, agents fees, legal fees, notary costs,
and car parking. Most companies (but not banks, federations and associations) can recover VAT.
Property Tax: The local real estate tax is approximately EUR 23 per square meter per year for all classes of
offce space, and is recoverable from the tenant as a part of the service charges. The amount of tax is based on
a complex calculation, which is done by the local authorities.
Fit-Out
Landlords Work: Space is typically delivered with suspended ceilings, ceiling lighting, carpeting, raised foors,
standard partitions within a tenants space, and restrooms.
Tenants Work: The ft-out must conform to guidelines known as Arbeitsinspektorat, which govern distances for
natural light, positions of desks, position of PCs on a desk, etc. For example, private offces must have windows
to outdoors and an air-exchange system, although cooling is not required. Windows are not required in confer-
ence rooms. The tenant is responsible for construction work with the landlords approval. The tenant normally
pays for air conditioning upgrading.
Fit-Out Costs: Fit-out costs for Class A or Prime buildings normally range from EUR 250500 per square meter
including construction (which is part of the tenants ft-out), wiring (which is negotiable), etc. Normally these
ft-out costs are negotiable, specifed in the lease, and included in the rent. Landlord ft-out costs for a lease
extension are also negotiable.
Austria
Landlords usually require a deposit of 36 months gross rent, or a rental guarantee from a bank that allows the
landlord to withdraw a guaranteed sum without explanation.
Restoration
The tenant is normally responsible for restoration to original condition, unless otherwise negotiated and stipulated in
the lease.
Car Parking
Typical monthly charges are EUR 150250 per car per month in city centers; EUR 50150 per car per month else-
where. These charges are normally in addition to the rent.
Additional costs for electricity, cleaning and other services within the unit are common.
TRANSACTION COSTS
Agency Fees
New Lease: Each party pays up to 20% of a years rent to its agent. Occasionally, a landlord pays the tenants
agency fees.
Lease Renewal: The fee depends on the lease contract and the agents standard rates. Lease renewal fees
average up to 20% of a years rent.
Rent Reviews: Fees are based on savings, and are negotiable.
Sublease: Tenant (sublandlord) pays up to 20% of a years rent. If separate brokers represent sublessor and
subtenant, each broker typically receives 20%, although this is negotiable. Subleases are rare in Austria because
lease contracts are relatively short, and the cost to both parties is high.
The stamp duty is 1% of total rental income for a defnite lease contract, or 1% of the 3-year total rent for an unlimited
contract.
Legal advisor fees are additional.
General
The Rent Act, known as Mietrechtsgesetz (MRG) governs leases so that regulations for commercial leases in modern
offce buildings are generally similar to the international standard.
Standard lease forms and standard formats are not used in Austria.
Right to Sublet
Subleasing is rare. Occupiers prefer not to sublet because it restricts their rights and enough alternative space is
available to avoid this situation. The landlord may negotiate a right to approve any subtenant.
The law requires a landlord to pay any damages resulting from late delivery.
Holdover by Tenant
No penalties apply unless stipulated in the rental agreement.
Typically, the cost of signs at the entrance is included in the rent. Additional signs and illuminated signs on the faade
and roof are normally negotiable, but legal restrictions exist, especially to protect historic buildings.
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Transparency
In Vienna, information on comparable deals (tenants, square meters, and rents) is generally available for recent
transactions. For markets outside of Vienna, such information is diffcult to obtain.
No standard building classifcation system exists in Austria; however, CBRE uses the following classifcations:
Grade A: These buildings have suspended ceilings and raised foors, cooling, clear ceiling height min. 2.80 m.
Grade B: If one of the criteria above is missing, the building is Grade B.
Grade C: These are older buildings without cooling, low ceiling height, and no raised foors.
CB Richard Ellis, Austria
Georg Fichtinger
Senior Director - Head of Capital Markets
+43 1 533 40 80 20
georg.fchtinger@cbre.com
About CBRE Austria: http://cbre.eu/at_en
For Local Market Reports: http://cbre.eu/at_en/research
Austria
BAHRAIN
Manama
LEASE LENGTH
Term
Leases can be of any length, although two to three years is the norm.
Termination
Landlords commonly grant the tenant an option to terminate upon giving the requisite notice period; three months
for short leases and up to six months for longer leases. The Tenancy Agreement usually addresses the process of
termination, and provides for penalties when the process is not followed.
Renewal
An option to renew is negotiable.
SPACE MEASUREMENT
Defnitions
Net Internal Area: Offce building areas are usually quoted based on net internal area according to RICS guidelines,
but there is no legal requirement to do so or to use any standardized measurement system.
OCCUPANCY COSTS
Rent
Recent Rental Rates: Please visit CBREs Global Knowledge Centre: http://gkc3.cbre.com/search/search.aspx
Quoted Rents: In 2010, landlords quote rents for commercial properties in Bahrain dinars (BHD) per square
meter, per month. The Bahrain Dinar is linked to the U.S. Dollar, so that BHD 1 = USD 2.65.
Currency for Rent Payable: Rent negotiated and stated in the contract is in Bahrain dinars.
Free Rent: Landlords commonly grant two to three months rent-free for ft-out for smaller spaces (up to 300 sqm)
and up to six months for larger spaces.
Rental Payment: Typically, rents are payable quarterly in advance.
BAHRAIN
Manama
+973 1655 6600
CBRE OFFICES
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Rent Advance: Tenant pays three months rent in advance and security deposit equal to one months rent upon
lease commencement.
Rental Escalations and Review Periods: Leases provide for periodic rent reviews at an agreed percentage
increase, typically 10% or market rate, whichever is lower.
Service Charges
Service charges cover a tenants proportional contribution towards building maintenance and services, based on
the tenants demised area under the Tenancy Agreement. Service Charges generally include, but are not limited to,
general maintenance, cleaning and waste management, elevator maintenance, supplies including generator fuel,
security cover, landscaping, maintenance of back-up generator and facilities management fee.
Service charges are also commonly called tenant service charges or common area maintenance.
Typical service charges range from 1520% of the rental rate.
Taxes
Municipality charge is levied at 10% of rental rate.
Utilities
Tenants pay for electricity and water according to metered usage. Tenants pay for their own telecommunications.
Fit-Out
Tenants pay all ft-out costs for typical core and shell presentation.
Municipality and Civil Defense approval is required for ft-out.
Standard offce ft-out, excluding electrical, typically costs around BHD 100 per square meter.
Restoration
The lease normally addresses restoration or surrender of ft-out.
A typical security deposit is the equivalent of one months rent.
Car Parking
Typically, tenants can expect one parking space per 75 sqm of space taken to be included in the rental rate although
this can vary from 50 sqm to 150 sqm depending upon the age and location of the building.
There are no other signifcant occupancy costs other than tenant insurance.
TRANSACTION COSTS
Agency Fees
New Lease: Landlord pays an agency fee of 8.33% of frst years rent.
Sublease: Subleases are not common. Sublessor would pay 8.33% of frst years rent.
Lease Renewal: Fees are typically between 50%100% of one months rent, and are negotiable.
None, other than registration fee of 3% of transaction cost, for a purchase transaction.
There are no standard leases in use in Bahrain. Larger international real estate practices and more modern develop-
ment companies generally provide British-style leases adapted for local use in the English language. Local brokers
and Bahraini development companies generally provide insubstantial lease documentation in Arabic, although
market forces and accepted best practices are phasing these out.
Bahrain
Right to Sublet
Most leases provide for subleasing, subject to landlord consent, although tenants rarely exercise this right.
Option to Expand
An option to expand may be negotiable, subject to availability, and lease conditions.
There is no culture of pre-leasing in Bahrain, due to construction and infrastructure issues. Tenants typically sign
leases only after substantial completion of a building.
Holdover by Tenant
Not typical in Bahrain, but happens on occasion, largely as a negotiating ploy by the tenant.
Negotiable, subject to lease conditions and percentage of space taken in building.
General
Most offce occupiers lease, rather than own. Strata title freehold offce sales are rare in Bahrain with only one or two
buildings available in the new business district of Seef direct from the developers. The term strata-title means that
the units in a building are owned by various occupiers or investors.
Transparency
Rental transaction information is typically regarded as confdential. No central database for transaction details in
Bahrain exists, and Bahrain does not have a culture of disclosure. Non-disclosure agreements are commonplace.
International real estate professionals may share market intelligence and generally cooperate under informal
agreements.
Properties can be informally classifed as follows, although no formal building classifcation system exists.
Grade A: International Grade A commercial space in Bahrain is currently limited to two iconic projects with a
global profle and high specifcation space that meets international standards for IT and electrical provision,
elevator capacity, parking and common areas, etc.
Local Grade A: Well-appointed modern commercial offce buildings with good facilities, located in commercial
centers.
Grades B and C: Properties lacking modern facilities and in locations that may no longer be considered primary
commercial districts.
CB Richard Ellis Bahrain WLL
Mr. Steve Mayes
Manager
+973 1655 6607
steve.mayes@cbre.com
About CB Richard Ellis Bahrain WLL: www.cbre.bh
Bahrain
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Brussels
+32 2 643 33 33
BELGIUM
LEASE LENGTH
Term
A standard lease, called a 3/6/9 contract, is a nine-year lease agreement with break options every three years. Parties
are free to agree to other term and break options if desired. Normally, either party can exercise the break. However,
lease agreements can be written to allow the landlord only or the tenant only to exercise a break option.
Renewal
Leases typically state that no automatic renewal follows expiration.
Termination
The parties may not terminate prior to the break option without each others approval.
SPACE MEASUREMENT
Defnitions
The measurement of the Gross Leasable Area (GLA) follows the measuring code of the BACS (Belgian-Luxembourg
Association of Chartered Surveyors). Although not mandatory, this code helps promote measurement consistency.
According to the BACS, the GLA includes all space to the window frame. Each tenant pays its proportionate share for
common areas. GLA includes:
Area occupied by internal walls and partitions.
Covered and accessible atria, measured at base level only.
Columns, shafts, piers, chimney breasts, stairwells, lift wells, other internal projections, vertical ducts, etc.
All corridors including those of a permanent and essential nature (fre corridors, smoke lobbies, etc.) and those
used in common with other occupants.
Service accommodations such as toilets, toilet lobbies, bathrooms, cleaners cupboards, kitchens, etc.
Effciency
A typical ratio of Net Usable Area (NUA) to Gross Usable Area (GUA) in a Class A property is 85%.
CBRE OFFICE
NETH.
LUX.
GERMANY
FRANCE
BELGIUM
Brussels
OCCUPANCY COSTS
Rent
Rent Quoted: Rents and service charges are quoted in EUR/sqm/year.
Rent Payable: Quarterly in advance.
Free Rent: One month free rent is typical, however this and other incentives vary with lease length, state of the
market, etc.
Rent Escalation: Rent is fully indexed annually to the Health Index (indice de sant or gezondheidsindex). The
Health Index is a measure of the cost of living. In contrast with the CPI, the Health Index does not take into ac-
count the prices of tobacco, alcohol, gasoline, or diesel fuel. By law, indexation may take place no sooner than
one year after the actual start date (not date of signature).
Operating Costs
The tenant pays service charges to cover its share of the cost of services. Belgian law prohibits an owner from
recovering more from its tenants than the actual cost of providing the services covered in service charges. Tenants
can ask the landlord to review all the invoices. The law requires the landlord to provide the tenant with a detail of the
invoices included in the common charges, although a court order is needed for a tenant to review landlords records
of specifc detailed expenditures, such as individual employee salaries, etc. Service charges adjust at the end of the
year following a calculation of the actual amount.
Service charges include costs for:
Electricity for Common Areas: The tenant pays the electricity for its proportional share of common areas.
Energy for Heating Ventilation and Air Conditioning (HVAC) systems, except in cases when the premises uses
independent heating systems for each foor.
Maintenance and upkeep of technical installations, including air conditioning and elevators.
Property insurance, but not tenants insurance for third-party rights and furnishings.
Miscellaneous items such as gardening, security, etc.
Taxes
The tenant typically pays about EUR 3040/sqm/year in the Brussels Capital region, EUR 810/sqm/year in Brussels
Periphery, and up to EUR 1015 in other regional cities. These taxes include:
Property Tax: The landlord always collects the property tax (prcompte immobilier or onoerende voorheffng) from
tenants. The property tax is due annually. This is based on an estimate of normal net average annual rental
income of the premises (revenu cadastral or kadastraal inkomen), estimated for offces and all other properties
in Belgium, which was last updated in 1975 (prquation cadastrale or kadastrale lastenverdeling), and has been
indexed since 1991.
Regional and local governments can additionally charge extra taxes on offce space, and these taxes may be
administered by the landlord or the landlords agent or may be payable directly by the tenant. In practice, extra
taxes on offce space are only applicable in the Brussels region.
- Regional Tax: The same tax applies for all of Brussels, since the city has the status of a region.
- Communal Tax: Brussels city is divided into 19 Communes. The communal tax on offce space depends on the
commune where the offce is located.
- Other Communal Taxes: These may include taxes per square meter and per parking space. Only fve com-
munes of the Brussels region require an additional tax for parking spaces.
Utilities
Electricity: Electricity for common space is included in the common charges and paid to the landlord, typically
around EUR 4/sqm per year Electricity for tenant consumption is metered for each tenant, and is typically about
EUR 6/sqm per year.
Water: Cost of water is about EUR 2/sqm per year for common areas and EUR .05/sqm per year for tenant
areas.
Belgium
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Landlords Work: The landlord normally delivers space with heating, mechanical and electric service, suspended
ceilings, ceiling lighting, carpet, and restrooms.
Tenants Work: The tenant pays for partitioning and upgrading, which require the landlords approval. If the
landlord contributes to ft-out costs, the lease agreement may require the tenant to repay part of the initial ft-out
costs if the tenant leaves after agreed breaks.
Cost of Tenants Work: Fit-out costs for Class A or Prime buildings in major cities normally range from EUR
500800/sqm, and can include construction, furniture, wiring, design fees, etc.
Landlords normally require a bank guarantee of six months rent for companies. The bank guarantee is generally the
same for all companies, regardless of creditworthiness or origin, because the law generally provides strong protection
to the tenant.
Restoration
The tenant must return the space to its original state if stipulated in the lease. An initial schedule of condition or
entrance survey (tat des lieux dentre or Inventaris bij aanvang) and a fnal schedule of condition or exit survey (tat
des lieux de sortie or Inventaris bij vertrek) are drawn up and are the basis for calculating a tenants indemnities.
Car Parking: Parking spaces rent at an additional cost to the tenant, and are often allocated based to each
tenants portion of the total occupied space.
Building Security: Service charges cover the cost of building security; however, it is common for the tenant to pay
extra for private security in multi-let buildings mostly for their own alarm system and access control.
Repairs: Unless otherwise addressed in the lease, Article 1720 and Article 1754 of the Civil Code apply.
According to these articles, the landlord is responsible for the exterior of the property and replacement of the
buildings mechanical equipment such as elevators, boilers, air conditioning, and other structural components.
The tenant is responsible for repairs and maintenance. However, a common market practice is to refer in the
lease to Articles 605 and 606 of the Civil Code, which limits the landlords obligations. Parties are free to vary
these terms.
TRANSACTION COSTS
Agency Fees
Tenant representation is becoming more and more common in todays market. Fees are:
New Lease: The tenant pays its agent 15% of the frst years rent, or the tenant pays a lump sum plus a pre-
agreed success fee calculated on savings. The landlord pays its agent 15% of the frst years rent.
Lease Renewal: For a desktop renewal the tenant pays its representative agent a fee of 7.5% of the frst years
rent. For a full-scale renewal, the fee amounts to 10.5% of the frst years rent. Tenants sometimes prefer to pay a
pre-agreed percentage of savings secured against the landlords quoted rent. The landlord pays its agent a fee
of 7.5% of the frst years rent for a desktop renewal; 10.5% of the frst years rent for a full-scale renewal.
Sublease: The tenant pays 15% of the frst years rent to its representative. Tenants sometimes prefer to pay a
pre-agreed success fee on savings.
The tenant is responsible for lease registration with the Ministry of Finance in the language of the region, French or
Dutch. Leases in English are sometimes accepted. Without registration, the sale of property to a third party could
invalidate a lease.
Leases exceeding nine years must be enacted before a notary public and registered in the mortgage registry. In this
case, the tenant pays a registration fee that includes mortgage duties and notary fees.
No other signifcant transaction costs exist.
Belgium
General
Legislation: The Belgian Civil Code governs leases.
Letter of Intent: A Letter of Intent usually precedes a written contract. In Belgium, a letter of intent is binding
unless otherwise specifed. A letter of intent often specifes conditions. It can be conditional upon receiving the
building permit, conditional upon board approval, etc. As soon as these conditions are met, a contract can be
signed.
Standard Lease
Most Belgian lease agreements are standard since the Belgian lease law is very developed. Most lease agreements
have approximately 25 clauses and a maximum of 20 pages.
Right to Sublet
Subleasing is common in Brussels. Subleasing normally requires the landlords prior written consent. A tenant has a
right to sublease only if such right is included in the lease contract.
Option to Expand
A right of frst refusal is often negotiable in the lease agreement, although it is not part of a standard lease.
Late Delivery by Landlord to Tenant
Penalties are negotiable.
Holdover by Tenant
Leases that address holdover by the tenant are uncommon in Belgium so far, but holdover conditions and penalties
are negotiable.
Signage is negotiable with the landlord. Landlords rarely allow naming of a building.
General
An agent normally represents either the landlord or the tenant, not both. An agent that represents both parties should
disclose its dual agency.
Transparency
The Belgian real estate market is highly transparent. All transactions across sectors are publicly available. Tenant
names, square meters, and rents for recent transactions are generally available.
Offce classifcations (A, B, C) indicate the age and, in most cases, also the quality of a building. But a higher-
grade building does not always offer more services such as air conditioning, cleaning, etc., than a lower-grade
building. Grade A buildings must have been built or renovated within fve years, and are of high quality.
Grade B buildings are typically 515 years old, but may be newer but of lower quality.
Grade C buildings are typically 15 years old or older.
CB Richard Ellis, Belgium
Kim Verdonck
Head of Research & Marketing, Partner
+32 2 643 33 34
kim.verdonck@cbre.com
About CBRE Belgium: http://www.cbre.be/be_en
For Local Market Reports: http://www.cbre.be/be_en/research
Belgium
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Prague
+420 224 814 060
CZECH REPUBLIC
SWITZERLAND
SLOVAKIA
POLAND
LIECH.
ITALY
HUNGARY
GERMANY
CZECH REPUBLIC
BOSNIA
& HERZ.
AUSTRIA
SERBIA
Prague
LEASE LENGTH
Term
Leases are typically for 35 years, sometimes up to ten years, with fxed rentals and predetermined annual indexations.
Renewal
Termination
An option to terminate is negotiable, and may provide for a penalty if exercised.
SPACE MEASUREMENT
The most generally accepted standard for measurement of gross lettable and net lettable areas is German GIF
Guidelines. Landlords most often quote gross lettable area, although they sometimes quote the net lettable area
instead or in addition.
Defnitions
Carpetable Area: Area available for offce use, excluding toilets.
Net Lettable Area: Measures from internal wall to internal wall, includes toilets, but excludes columns and verti-
cal penetrations. The net lettable area is typically about 4% greater than the carpetable area.
Gross Lettable Area: Includes net lettable area, plus add-on factor (typically 512% for a Class A building
in Prague) plus common areas such as toilets and corridors shared by more than one tenant, which are not
included in the add-on factor.
OCCUPANCY COSTS
Rent
Rent Quoted: Rents are quoted net in EUR/sqm/month, or occasionally in Czech koruna (CZK) per square meter
per month.
CBRE OFFICE
Rent Payable: Quarterly or monthly in advance.
Free Rent: Free rent is typically up to one month free for each year of the lease.
Included in Rent: The landlord usually pays for external and structural repairs.
Rent Escalation: Leases generally provide for an annual escalation, normally based on the Harmonized EUR
index. Fixed rent increases can sometimes be agreed to and stipulated in the lease.
Operating Costs
Also called Service Charge, this is the tenants proportionate contribution of the cost of maintaining common areas
and services. The service charge covers:
Operating, maintaining, cleaning, and repairs of lighting, air conditioning, plumbing, drainage, sewerage,
fre prevention, elevators and telecommunication systems in the building, electricity in common areas, building
security, etc.
Property Tax, Real Estate Tax: Property tax in the Czech Republic is nominal. The landlord pays the tax and
recovers it via service charges.
Building and Property Insurance
A typical service charge in a Class A building in Prague is around EUR 3.84.5/sqm/month. Service charges are
usually on an open book basis and recalculated annually according to actual cost.
Taxes
Property Tax: The landlord pays the property tax and recovers it via service charges.
Value Added Tax (VAT): The Czech Republic has VAT rates of 20% and 10%. Most charges, including rental
charges, service charges, purchases of furniture and equipment, etc., are subject to 20% VAT, payable with each
invoice. A few minor elements of service charges (such as water consumption) are subject to 10% VAT.
Utilities
Electricity and Air Conditioning: Electricity in the leased area is usually metered. The tenant pays for actual
consumption, generally including electricity for air conditioning or air-cooling, sometimes as part of the service
charge.
Telephone Lines: The landlord provides telephone lines through its switchboards or the telecom supplier provides
them. The tenant pays either the landlord or supplier according to usage.
Telecommunication Charges: The tenant usually must arrange and pay for telecom services directly with
suppliers.
Landlord Work: The landlord usually provides carpeting (or contribution towards carpeting), suspended ceilings,
ceiling lighting, raised foors, perimeter trunking, etc. Inclusion of interior partitions is negotiable.
Tenant Work: The owner usually allows the tenant to do ft-out using the tenants architects, engineers, and
contractors. The lease contract usually specifes that the landlord may not unreasonably withhold its approval of
the tenants ft-out.
Tenant Work Cost: Fit-out costs for Class A or Prime buildings in major cities normally range from 250500 EUR
per sqm including construction, furniture, wiring, design fees, etc.
This is usually a cash deposit or a bank guarantee for 36 months rent, plus service charge and VAT. In addition, a
parent company guarantee is sometimes required.
Restoration
The tenant is usually allowed to vacate the premises in a condition of normal wear and tear, but this is negotiable.
The landlords of Class A buildings usually require restoration of ft-out by the tenant.
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Insurance: The tenant pays directly for third-party insurance, insurance for rented premises and its contents.
Car Parking: Parking spaces are allocated based on a ratio, which ranges from one lot (parking space) per 50
sqm of space leased in Pragues Periphery to one lot per 200 sqm of space leased in the city center. Tenants pay
extra for parking spaces, commonly up to 100 EUR per space in the periphery, and up to 250 EUR per space in
the city center.
TRANSACTION COSTS
Agency Fees
Separate agents commonly represent tenants and landlords, and each party pays its agent or agents a negotiable
fee, typically 814% of the average annual rent, depending on the value of the lease. If the agent represents a tenant,
the fee is split commonly into fxed part plus cost-saving part.
Reputable real estate agents rarely take fees from both the landlord and the tenant.
For subleases, the sublandlord pays its agent a fee.
Legal Fees: The landlords solicitors normally prepare the lease agreement. Each party pays its lawyers fees.
No stamp duty applies.
No standard lease exists.
Right to Sublet
Subleasing is normally allowed, subject to the landlords reasonable written consent, sometimes with restrictions.
Option to Expand
Options to expand and the right of frst refusal are negotiable.
Penalties for late delivery vary widely and are negotiable, as specifed in the lease. Typically, the landlord will agree
to pay two times the daily rent for late delivery.
Holdover by Tenant
Typically, the tenant pays two times the daily rent for holding over after lease expiration, as specifed in the lease.
The major tenant in a building generally has naming or signage rights if the building provides such a right, but this
is negotiable.
General
Prague, as the business and political capital of the country, has Czech Republics most developed real estate markets
in all sectors. Offce markets in regional cities are already being developed, mainly in cities such as Brno, Ostrava
and Plzen.
Transparency
Data is generally available for recent transactions in Prague, including tenant names, square meters, building name,
and location. Transparency outside of Prague is still limited.
BUILDING CLASSIFICATION
This system of classifcation applies throughout the Czech Republic, although almost all Class A buildings are located
in major cities.
Czech Republic
Class A
Hard criteria: All hard criteria must be met.
- Modern cable management: either raised foors, suspended ceiling, suspended ceiling with fexible pole,
simple provision for under foor cabling, compartment trunking.
- Modern air handling system: including VAV, 4-pipe fan coil, 2-pipe fan coil and cooler beam system.
- Secure dedicated parking: CBD 1:100, central 1:75, non-central and periphery 1:50.
- High-quality standard fnish.
- 24-hour access and security.
Soft criteria: Five of the seven soft criteria must be met.
- High speed modern lifts.
- Clear ceiling height of at least 2.65 m.
- Prestige / quality reception.
- Quality fnish to work areas.
- Flexible partitioning or moveable walls.
- Double-glazed windows or anti-glare glass.
- Services in the building or immediate vicinity: e.g., restaurant, shops, post offces, dry cleaners.
Class B
Similar standard of design and fnish as for Class A.
Reduced services.
Partial air handling system.
Quality of building design and materials inferior to those of Class A.
Ratio of dedicated car parking to the area occupied is lower than for Class A.
Class C
Generally un-refurbished, Soviet-era buildings.
PURCHASE AND SALES
Very few companies own the offce premises. A 3% transfer tax is applicable on asset sales of property, payable by
seller.
CB Richard Ellis, Czech Republic
Katarina Wojtusiak
Associate Director, Head of Tenant Representation and Global Corporate Services
+420 221 711 014
katarina.wojtusiak@cbre.com
Jana Novotn
Head of Research
+420 221 711 050
jana.novotna@cbre.com
About CBRE Czech Republic: http://www.cbre.cz/cz_en
Czech Republic
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DENMARK
Arhus
+45 7022 9602
Copenhagen
+45 7022 9601
SWEDEN
POLAND
NORWAY
GERMANY
DENMARK
Arhus
Copenhagen
LEASE LENGTH
Term
A lease continues until terminated by either the tenant or the landlord, with no need to renew the lease contract.
Parties agree to an initial term, whereby neither can terminate the lease. Typically, this non-termination period is much
longer for the landlord than for the tenant.
The non-termination period is typically 35 years for the tenant; 510 years for the landlord.
For new construction, however, the non-termination period is typically 1012 years for the tenant; 1520 years for the
landlord. Although negotiable, it is generally more diffcult for a tenant to negotiate a shorter non-termination period
with a large lease and in a new building, because landlords have more invested in large new buildings.
Termination
Once the initial period of non-termination for the tenant ends, the tenant can terminate the contract with notice to the
landlord. The number of months of required notice is negotiable. Six months notice is common, although the trend
in 2010 is for a longer notice period: up to 18 months for large occupants.
After the non-termination period, in case the market declines, a tenant can get the rent reduced to the current market
rate. Companies like CBRE provide the market rate information. The law provides that the rent reductions take place
in steps over fve years, although landlords and tenants can agree to waive this provision and use a different rent
reduction schedule. Tenants can go to court if parties cannot agree on these issues.
A landlord can evict a tenant only if the landlord can show it needs the space for its own use, and after the non-
termination period for the landlord has expired.
SPACE MEASUREMENT
The Commercial Lease Act provides strict rules for the measurement of space. Parties have the option of engaging,
or not engaging, a specialized surveyor, licensed by the Danish government, to measure the space. Because the
measurement process can be costly, parties do not always use a licensed specialist. When the licensed surveyor
measures the space for a transaction, it is noted in the lease contract.
CBRE OFFICES
Defnitions
Usable area: Usable area equals the foor area exclusively occupied by the tenant plus area occupied by exterior
walls + area occupied by walls adjoining common areas + 50% of walls separating space from other tenants
on multi-tenant foors + tenants share of toilets. Toilet areas located inside a tenants space are included in
the usable area. When more than one tenant shares toilets, the area occupied by toilets is allocated among the
tenants on a pro rata basis.
Rentable area: Rentable area equals usable area plus a percentage of common areas. The common areas
include stairs, corridors, and elevator shafts.
Effciency
A typical ratio of the area exclusively occupied by tenant to rentable area in a Class A Copenhagen building is
8085%.
OCCUPANCY COSTS
Rent
Rent Quoted: Landlords usually quote net rental in Danish kroner (DKK) per rentable square meter per year. The
Danish kroner is closely tied to the value of the Euro, allowing for small fuctuations.
Rent Payable: Rent, including escalation and service charges, is typically payable monthly or quarterly in ad-
vance. Base Rent is actual rent not including escalation and service charges.
Free Rent: Normally, free rent periods are not a common practice. In soft markets, such as the market in 2010,
tenants may negotiate 24 months free rent on a normal lease contract.
Rent Escalation: Rent usually increases annually in proportion to the increase in Danish Net Price Index, pub-
lished by Danmarks Statistik, usually with a minimum increase of 23%.
Fit-out is included in rent: See discussion of Fit-out below.
Service Charges
The tenant pays for a proportionate share of service charges (i.e., insurance, common electric, maintenance, clean-
ing, security, management fees, property tax, etc.) as specifed in the lease. Service charges are adjusted every year
to match the actual cost. Legislation allows a landlord to increase the service charge if property taxes or other taxes
increase.
Service charges and taxes usually add 1020% to the base rent.
Taxes
Property Tax: Property taxes are included in the service charges.
Value Added Tax: VAT at 25%, fat on everything, is payable on rent, service charges, and other recoverable
expenses that are in addition to service charges, such as heating, water and electricity, unless the tenant pays
them directly. Some owners register their buildings for VAT and some do not. If the building is registered, the ten-
ant pays VAT and can deduct paid VAT from incoming VAT. A developer who owns a building is likely to register
it for VAT. However, banks do not register buildings they own for VAT because banks in Denmark do not pay VAT
and do not charge VAT on costs. They charge higher rent instead, typically about 25% more, because they have
all the expenses including VAT. This causes a problem if a sublet is in a bank-owned building because the 25%
VAT is not deductable.
Utilities
The tenant normally pays consumption costs such as water, heating and electricity, separately and directly to the utility
company based on direct meters. Water and electricity are highly taxed, and their costs are high by international
standards.
Fit-Out
Fit-out is included in rent. The landlord usually includes a basic ft-out, including IT wiring, for an average capacity
requirement in base rental rate. If the tenant requires above-standard ft-out or other extras, the tenant usually pays
the added cost as higher rent, and sometimes pays for extra costs separately. The scope is negotiable and included
as part of the lease agreement.
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Restoration
Most contracts require the tenant to restore the premises to the condition in which it was received. Some allow for
reasonable wear and tear. Exit costs are often negotiable. When the tenant is leaving, the restoration (reinstatement)
costs are calculated, but normally the reinstatement work is not done. The landlord typically re-fts out the space for
the incoming tenant. The calculated reinstatement cost is an estimate and is always negotiable.
The tenant usually pays a deposit, equivalent to 36 months rent, normally as a bank guarantee, but in soft markets,
most landlords prefer six months rent in cash. Landlords prefer a cash deposit because they can use the money as
capital, and do not have to maintain it as a deposit. For larger premises and longer leases, landlords may require a
parent company guarantee in addition to a security deposit.
Landlords rarely require personal guarantees.
Car Parking
Parking spaces are sometimes included in the rent. In prime or busy city areas, the tenant usually pays for parking
in addition to rent, if parking is available. In larger cities, parking is very limited in downtown areas, and it is often
allocated to executives only. Good public transportation is available in Copenhagen and other larger cities. Many
employees ride bicycles to work. Copenhagen parking costs can range from 6,000 to 45,000 DKK per car per year,
depending on location, and whether spaces are outdoors or in a parking garage.
There are no other signifcant occupancy costs.
TRANSACTION COSTS
Agency Fees
Tenant representation is not common, but a diligent tenant should consider hiring a tenant representative broker.
New Lease: If a broker represents a tenant, the tenant typically pays a commission that is 15% of the frst years
rent, including service charges. The landlord also typically pays 15% of the frst years rent (including service
charges) to the landlords listing broker. If CBRE is the broker for both the landlord and the tenant, then normally
the landlord pays a single 15% fee to CBRE.
Sublease: Sublessors typically pay a commission of 15% of the frst years rent (including service charges) to the
listing broker. If a second broker brings the tenant, the brokers share the 15% commission: typically, 70% to the
listing broker, and 30% to the tenants broker.
Legal Fees: Tenants generally employ and pay their lawyers to review the lease draft that the landlord provides,
although CBRE lawyers typically review leases and are permitted to give legal opinions to their clients. Legal fees
in Denmark are usually low for this service, since most lease agreements are short and simple (1015 pages), as
leases are highly regulated.
There are no other signifcant transaction costs.
General
The Commercial Lease Act, called Erhvervslejeloven, regulates commercial leases and addresses such issues as use,
maintenance, termination, move-out, and rent payment.
Most leases include standard lease language that is generally known and accepted. However, lease conditions are
always negotiable so that leases can be modifed.
However, some restrictions apply to lease termination. The Danish law says that the tenant can terminate the lease ac-
cording to the agreed term of notice, except if it is fxed for a specifc period of time. The landlord can only terminate
the lease according to the specifc circumstances specifed in the Danish Commercial Lease Act.
CBRE is using the Danish Property Federation standard lease agreement, amending it to follow all the particular terms
agreed between the landlord and the tenant.
Denmark
Right to Sublet
Subleasing is usually allowed in the lease, with landlord approval. If the subtenant is a related company, the landlord
cannot unreasonably withhold consent. Lease provisions that allow the landlord to recapture are rare.
Option to Expand
An option to expand is rare, but a tenant may often negotiate a frst refusal for other space in the building.
Normally, a penalty is imposed based on a multiple of rent. For a new building, terms of such a penalty are covered
in the lease, when the hand-over date is critical, because a new building has a greater risk of being delayed than an
existing one.
Holdover by Tenant
Holdover usually incurs an agreed penalty payment. This is not in the law and not usually addressed in the lease, but
it can be agreed to and be a part of the lease contract. Such an agreement is rare because a normal lease contract
in Denmark is continuous until notice has been given by tenant or landlord.
Building Security
Usually, basic building security is included, and the tenant pays for any additional measures. Basic building security
usually includes an alarm system but not a guard. It is not typical to have a guard or concierge, even for a large
multi-tenanted CBD building.
The landlord usually allows some moderate signage internally and externally. In Copenhagen, city authorities must
approve external signs. Often landlords and tenants work together to get approval. On older and historical buildings,
external signage is usually limited to the door, intercom plate, and a placard in the lobby.
Transparency
For Copenhagen and elsewhere, transaction comparables which identify tenants, square meters and rents are gener-
ally diffcult to obtain. Brokers usually have access only to second-hand information. However, increasing membership
in international property bodies such as the Royal Institution of Chartered Surveyors has increased focus on the lack
of transparency. Some CBRE brokers belong to the Royal Institution of Chartered Surveyors, and all work under its
rules. CBRE has been active in organizing a quarterly research forum for enhancing market transparency regarding
both sales and leases taking place in the market.
No offcial building classifcation system exists in Denmark, but terms such as Prime, Grade A, B, etc., may be used
to describe overall building quality.
CB Richard Ellis, Denmark
Nils Thulstrup
Director, Global Corporate Services
+45 3544 0925
nils.thulstrup@cbre.com
Robin Rich
Head of Research
+45 3544 0923
robin.rich@cbre.com
About CBRE Denmark: http://www.cbre.dk/dk_en
For Local Market Reports: http://www.cbre.dk/dk_en/research
Denmark
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FINLAND
Helsinki
+358 9 2516 6304
SWEDEN
RUSSIA
FINLAND
NORWAY
LATVIA
ESTONIA
Helsinki
LEASE LENGTH
Term
Indefnite lease terms are common in all property types. Lease agreements for smaller occupiers are often valid until
further notice with three, six, or 12 months prior notice required.
Fixed term leases are typical for large occupiers and international companies, typically 35 years. Fixed terms longer
than fve years apply mainly with single tenancy or new developments.
Termination
Parties commonly agree on a fxed term after which the lease continues until one of the parties terminates it. Tenants
normally have no other break options or renewal options.
With fxed lease terms and single tenancies, break options and renewal options have become more common, espe-
cially with large international occupiers.
SPACE MEASUREMENT
Leasable Offce Area
A tenant pays rent on the leasable (usable) offce area. This includes interior, not load-bearing partitions, bathrooms,
entrances and other common areas. Leaseable area measures to the inside of exterior walls. It excludes mechanical
space, vertical penetrations, and exterior walls.
Shared Meeting Rooms
Costs of areas used by more than one tenant are normally allocated proportionally according to the amount of space
each tenant leases. Shared meeting rooms, especially in business parks, are normally charged according to usage.
OCCUPANCY COSTS
Defnitions
Gross Rent: This has traditionally been the rent structure in Finland, especially for multi-let buildings. Gross
rent includes insurance, property taxes, and most service expenses, such as heating, water, waste disposal, and
possibly ground fees. Gross rent includes electricity and cleaning of public areas of the building.
CBRE OFFICE
Net Rent: Also called base rent. Net rent excludes charges for maintenance and user services. Lease arrange-
ments in business parks and in new developments typically provide for net rent, plus maintenance charge, plus
charges for optional user services.
Double Net Rent: The tenant pays all occupancy costs excluding major repairs, property taxes, and property
insurance. This applies when a tenant occupies an entire building.
Triple Net Rent: The tenant pays all occupancy costs including major repairs, property taxes and property insur-
ance. This applies when a tenant occupies an entire building.
Maintenance Charge: Charges for operating the building and making minor repairs to the building.
User Services: Also called extra services. Services that a tenant can choose, such as mailing, operator, recep-
tion, cleaning, security, meeting facilities, catering, restaurant, secretarial, Information and Communication
Technologies (ICT), offce supplies and fttings services, etc. User services apply mostly to business parks.
Service Charge: Maintenance charge + user services charges.
Market Rent in Finland is Gross Rent.
Rent
Rent Quoted: Rent is quoted in Euros (EUR) per square meter per month.
Rent Payment: Tenants generally pay rent monthly in advance on the second day of the month.
Free Rent: Typically, no rent-free periods apply unless the tenant takes part in renovation. However, landlords
are increasingly using rent-free periods to attract occupiers with rent-free periods at this cycle due to oversupply
of good offce space because of the economic downturn and of huge volume of new offce space in the Helsinki
Metropolitan Area.
Rent Escalation: The following methods are used: (1) Cost-of-Living Index: Annual adjustment based on cost-
of-living index is normal when the lease term is at least three years or valid until further notice. (2) Review to
Market: In addition to cost-of-living index, parties may agree to rent review to market after 3 or 5 years. (3)
Fixed rent, (4) Fixed increase, or (5) Combination of CPI and minimum increase.
Taxes
Property taxes: In traditional leases in multi-tenant buildings, property taxes are included in the rent. In new
developments, in business parks and in single-tenant buildings where leases are triple net, the landlord passes
property taxes (and other possible charges) to the tenant as a part of a maintenance charge.
Value Added Tax: VAT is paid and is recoverable. The standard rate is 23% (increased July 1, 2010). Leases of
land and buildings are exempt unless registered for VAT. Many landlords register for VAT if the tenant is liable to
pay VAT, in order to deduct it from investments and maintenance costs. Sales of real property are exempt.
Utilities
Normally, the tenant pays for electricity, cleaning of the premises, and in some cases, for water.
Landlord Work: A landlords contribution is negotiable. Suspended ceilings, ceiling lighting, and restrooms can
be either the landlord or tenants work, as negotiated.
Tenant Work: Usually the tenant needs the landlords permission before making improvements. The landlord
may use its supervisor for the work.
Tenant Work Cost: For Class A or Prime buildings in major cities, costs normally range from EUR 1001000 per
sqm including construction, furniture, wiring, design fees, etc.
The deposit is normally at least three months rent excluding VAT, but is negotiable.
Restoration
At lease termination, the tenant is responsible for restoring the premises to its original condition, allowing for fair wear
and tear, if not otherwise agreed.
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Internal Repairs: The tenant usually pays for repairs to the premises. Normally, the landlord maintains restrooms.
Building Security: Building security is usually included in the rent, but special security, needed by some tenants, is
generally extra.
Parking may be included in the lease or rented separately.
Reception on the ground foor of multi-tenanted buildings.
Additional services in business parks.
TRANSACTION COSTS
Agency Fees
Agency Fee: The landlord has traditionally paid the agency fee. However, tenant representation is increasing,
especially with international and other experienced occupiers. When an agent purely represents a tenant, the
tenant pays the agency fee, normally based on the gross rent.
For a New Lease or Sublease: The landlord and the tenant (when represented) typically pay a fee of 12.517%
of the frst years rent (1.52 months rent) to its broker. Due to the fnancial crisis of 20082010, in some cases
fees have been up to 30%. Fees are slightly higher for smaller properties, and may be higher for long leases
(i.e., of 3 years or more) than for short leases, valid until further notice.
Legal advisory costs often apply.
General
The legal framework for lease agreements in Finland secures the rights for both tenants and landlords, and so parties
concentrate mainly on the commercial terms, which vary greatly from one lease to another, and do not often do
extensive negotiation of the legal terms in the lease.
Third parties produce standard lease templates, used mostly for small leases by small users without consultants and
without in-house real estate expertise.
Right to Sublet
Subletting became more common after the fnancial crisis, when demand for premises diminished. Normally, the
landlord must approve the subtenant, but this is normally agreed in the head lease (i.e., the tenants master lease).
Holdover by Tenant
If a tenant holds over, the penalty is negotiable and determined by the lease agreement. For fxed and further notice
leases, the penalty is often the next months rent.
Negotiable; exterior signage requires a permit from the owner, and normally from the city as well.
Transparency
Good historical data of rental levels by submarkets nationwide and information about property returns and opera-
tional costs is available. Information on actual leases is not collected by any public authority. Consultants collect some
actual lease information, but rarely share it with clients, because it is considered confdential in Finland.
Although no broadly standardized system exists in Finland, ratings of A, B and C are well understood.
Finland
PURCHASE AND SALES
Traditionally, larger companies in Finland have been owner-occupiers, although companies increasingly have dis-
posed of their assets through sale and leaseback arrangements over the past years. There are still companies that
own at least some of the premises which they occupy. Landmark buildings, such as corporate headquarters, are
sometimes considered better to be kept on a companys balance sheet.
Many properties are held as (mutual) real estate companies with one (or several) owners.
Property Transfer Taxes: Transaction taxes of 1.6% for shares and 4% for property apply. If a property is owned by a
(mutual) real estate company, capital transfer taxes are payable on the transaction of company shares.
CB Richard Ellis, Finland
Erik Lnnfeldt
Head of Corporate Services, Finland
+358 10 320 1222
erik.lonnfeldt@cbre.com
About CBRE Finland: http://www.cbre.f
Finland
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FRANCE
Headquarters Offce:
Paris
+33 1 53 64 00 00
CBRE Offces in
Provinces:
Aix-en-Provence
+33 4 42 60 01 31
Bordeaux
+33 5 56 90 52 30
Lille
+33 3 20 21 88 50
Lyon
+33 4 72 83 48 48
Marseille
+33 4 96 11 46 11
Toulouse
+33 5 62 72 44 60
Other Offces
in Paris Region:
Bagnolet
Montreuil
Montrouge
Neuilly-sur-Seine
Paris
Saint-Denis
Affliate Offces:
Annecy
Avignon
Blois
Bourgoin-Jallieu
Caen
Chambry
Clermont-Ferrand
Dijon
Grenoble
Le Havre
Metz
Mulhouse
Nancy
Nantes
Nice
Orlans
Rennes
Rouen
Sophia Antipolis
Strasbourg
Tours
Vannes
LEASE LENGTH
Term
Commercial leases in France are highly regulated and standardized. The French commercial lease is commonly
known as the bail trois/six/neuf (3/6/9 lease). A key feature is the tenants statutory right to renew.
The 3/6/9 lease gives a tenant the right to break every three years, unless the landlord and tenant agree to a frm
6- or 9-year commitment, called a frm contract period. Landlords negotiate and achieve such frm contract periods
in tight markets, in high-quality buildings, in build-to-suits, and in exchange for free rent or ft-out contributions.
Renewal
Offce tenants have the right to renew at lease end (end of year nine). The parties usually negotiate market rent,
but sometimes the issue goes to court. The tenant must follow formal procedures to renew, or may suffer expensive
consequences. The law does not allow a tenant to waive its right to renew.
If the tenant agrees to renew at the new rental rate, the renewed lease extends for nine more years with the same
conditions as the old lease. If the tenant accepts the renewal but disputes the new rate, the tenant can remain in
the premises at the old rent, and the landlord can request a judicial decision as to the renewal rate from the Higher
District Court (Tribunal de Grande Instance). The amount the court sets is retroactive to the effective date of the lease
renewal. If a tenant is unwilling to accept the new rental rate or to continue the lease, then pursuant to service of
notice, the tenant normally vacates the premises without compensation.
CBRE OFFICES
UNITED
KINGDOM
BELGIUM
NETHERLANDS
GERMANY
SWITZERLAND
LUX.
AUS.
LIECH.
SPAIN
ITALY
FRANCE
ANDORRA
MONACO
Avignon
Nice
Grenoble
Chambry
Nancy
Mulhouse
Le Havre
Tours
Vannes Blois
Annecy
Sophia Antipolis
Lille
Clermont-Ferrand
Marseille
Toulouse
Bordeaux
Lyon
Strasbourg
Rennes
Nantes
Orlans
Rouen
Caen
Aix en Provence
Paris
Bourgoin-Jallieu
Dijon
Metz
Termination
The tenants right to break was discussed above.
The landlord has a right to break at the end of the lease and compensate the tenant. The court generally fxes the
amount, using an expert witness whose opinion is usually binding. The sum can be considerable. However, if the
tenant fails to fulfll its lease commitments, the landlord is entitled to refuse to renew without paying indemnity.
Other Lease Options
Short-term Options: A tenant that needs to lease space for less than three years has four options:
- Temporary Lease for Specifc Situations (Convention dOccupation Prcaire): This type of lease allows the
tenant to occupy the premises for fewer than three years. The agreement must specify the reasons for a shorter
term. A Convention dOccupation Prcaire uses case law, and is exempt from the regulations that govern a
3/6/9 lease. It gives the tenant less legal protection than a 3/6/9 lease because it lacks the clear legal frame-
work of the 3/6/9 lease, and is rarely used.
- Derogatory Lease (Bail Drogatoire): This type of lease cannot exceed 24 months. The agreement must specify
the reasons for a shorter term. A Bail Drogatoire also protects a tenant less than a 3/6/9 lease, and is rarely
used.
- Sublease: Subleasing requires landlord approval, and is usually restricted to less than 50% of the space
occupied by the tenant. The space must be used for business only. This part of the law is more protective
towards the landlords interests than the tenants interests. The subtenant must usually be an affliate of the
sublandlord.
- Standard 3/6/9 Commercial Lease: This provides the most fexibility, because the tenant can negotiate a break
option before the end of the frst three-year period (at the end of year two, for example) with a penalty as
agreed by both parties, and specifed in the lease.
Professional Lease (Bail Professionel): The Professional Lease is a leasing contract between the landlord and
members of the liberal professions. The Corporate Tax Code and the Social Security Code determine what
businesses qualify as liberal professions. Liberal professionals provide intellectual services. They include lawyers,
medical doctors, kinesiotherapists, architects, chartered accountants, translators, etc., irrespective of company
size and number of employees. A Professional Lease is a six-year lease. However, members of the liberal profes-
sion are free to contract a standard commercial lease (Article 57A of December 23, 1986) to beneft from its
longer duration (9 years).
SPACE MEASUREMENT
Defnitions
The most common measurement used in leases is net lettable area, which includes usable offce area, circulation,
restrooms and an allocation of common areas, and excludes vertical circulation.
Effciency
A typical ratio of carpetable area to net lettable area in a Class A building in Paris is 6063%.
OCCUPANCY COSTS
Rent
Rent Quoted: Offce rents are quoted as net rental in EUR/sqm/year. VAT (19.6%), service charges and property-
related taxes are charged additionally.
Rent Payable: Rent is normally paid quarterly, in advance. Monthly or annual payment is rare and must be
stipulated in the lease. Tenants usually pay by check or by electronic money transfer. The tenant generally pays
additional rent for amenities such as an inter-company restaurant, car parking spaces, basement storage areas,
etc.
Free Rent: In 2010, free rent ranges from 0.51.5 months by frm year of the lease, depending on market condi-
tions and the length of the frm contract period.
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Rent Escalation
- Rent is indexed most commonly annually based upon the Cost of Construction Index, produced by the INSEE
(Institut National de la Statistique et des tudes conomiques), which typically increases 25% per year, oc-
casionally more, with a market review at the end of the ninth year when the lease ends.
- Indexation is usually annual, although parties sometimes agree to semi-annual or quarterly indexation.
- Parties occasionally use another index, which must be specifed in the lease and must be related to the tenants
business activity. For example, a software tenant could agree with a landlord on rent increases based on an
index of economic trends of the IT sector.
- A new indexation system from the INSEE, called ILAT (Indice des Loyers dActivits Tertiaires) may become
available in 2011, allowing parties to use either index. The ILAT index may eventually replace the INSEE index.
Service Charge
The service charge is payable quarterly, in advance, with a reconciliation statement at year-end. The amount varies
according to amenities provided. Landlords are not permitted to charge more than the actual cost of services.
The landlord normally pays for building insurance, external repairs and repairs to common areas. The landlord
recovers the cost of building insurance and common area repair from the tenant as part of the service charge.
Service charges typically range between EUR 7080/sqm/year in a high-rise La Dfense building, EUR 5075/sqm/
year for a Prime Paris CBD building; and lower outside of the Paris region.
Taxes
Offce Tax (Taxe sur les Bureaux): This tax applies to the Paris Region only and is levied annually. The landlord
pays it and the tenant usually reimburses the landlord. The amount of tax varies by district. Some properties are
exempt, including offce space smaller than 100 sqm, properties located in zone de re-dynamisation urbaine or
in a zone franche urbaine and properties used by associations, social, educational or cultural organizations. Full
tax rates for offces are:
- Zone 1: Paris West and most of Western Business Districts: EUR 15/sqm/year.
- Zone 2: Paris East, South of Hauts-de-Seine, Seine St-Denis, Val-de-Marne: EUR 6.7/sqm/year.
- Zone 3: Rest of Paris Region: EUR 3.2/sqm/year.
Land Tax (Impt Foncier): The landlord pays the Land Tax annually and the tenant usually reimburses the
landlord. The level of this tax varies according to specifcation (level of equipment in the building, i.e., elevator,
facilities, etc.) quality, and the location of the property. The Land Tax ranges from EUR 936/sqm/year.
Contribution Economique Territoriale: Since early 2010, occupiers have been subject to the CET (replacing the
Taxe Professionnelle), which includes the following taxes:
- Real Estate Tax: CFE (Cotisation Foncire des Entreprises), based on the rental tax value of used buildings (local
tax rate).
- Corporate Tax: CVAE (Cotisation sur la Valeur Ajoute des Entreprises), based on the corporate added value
(national tax rate at 1.5%), excluding companies with an annual turnover below EUR 152,000.
Value Added Tax (VAT): In 2010, 19.6% VAT is paid on rent, service charge, design fees, and construction costs.
Utilities
Electricity: Electricity used in common areas is included in charges paid by the tenant. For the electricity used in
the area occupied by the tenant, the occupier is obliged to sign a contract with an electricity supplier and pay the
electricity supplier directly.
Water: Water used by the tenant for normal offce use is included in the service charges that the tenant pays.
Fit-Out
Landlord Work: The landlord normally delivers new space with suspended ceilings, ceiling lighting, carpet and rest-
rooms. In addition, landlords generally provide some ft-out allowance, except in very strong markets.
Tenant Work: The tenant undertakes and pays for the remaining ft-out, usually subject to landlord approval. Landlords
do not build space at landlord cost and recover the costs in the rent.
France
Cost of Tenant Work: Fit-out costs for Class A or Prime buildings in major cities normally range from EUR 400600/
sqm, and can include construction, wiring, design fees, etc. Furniture benchmark costs are generally around EUR 1500
per workstation.
Restoration
Most leases require the tenant to return the premises in a perfect state of repair and right for landlord to require
premises to be restored to delivery condition. Negotiations can usually exempt normal wear and tear.
Deposit (also known as Rent Deposit)
- Landlords usually require a three-month cash deposit at lease signature. The three-month deposit is re-
quired for all tenants, independent of their fnancial strengths. The guarantees mentioned below (Standard
Bank Guarantee, First Demand, Parent Company) are additional guarantees that can be required by the
landlord. The landlord reimburses the cash deposit at lease end, although no law addresses a deadline for
reimbursement.
- A fnancially strong tenant, known as a tenant with a strong fnancial covenant, could replace the deposit with
a parent company guarantee or a bank guarantee.
- A weak tenant usually pays the deposit in cash and a frst demand bank guarantee. Other guarantees issued
by a parent company or a bank guarantee (often frst demand) can also be required.
Guarantees: In addition to a cash deposit, French landlords usually require a bank guarantee or corporate
guarantee at lease signature. A corporate guarantee is also known as a parent company guarantee. The
guarantee can vary from 13 years gross rent, depending on the fnancial strength of the tenant.
- A bank guarantee is customary. It is a unilateral contract in which a bank guarantees to reimburse the oc-
cupiers debt. Obtaining a bank guarantee can be time-consuming, so tenants should contact the bank as
early as possible. The bank can often require a specifc amount of funds set aside as collateral. There are two
types of bank guarantees: a Standard Bank Guarantee and a First Demand Guarantee. A Standard Bank
Guarantee requires legal action to release money. A First Demand Guarantee is an automatic option for the
landlord to have money released, without a court action. A bank, present in France, guarantees a sum of rent,
and often service charges, taxes, etc.; usually on a rolling basis for the duration of the lease. A First Demand
Guarantee is the most common form of guarantee in 2010.
- Corporate (Parent Company) Guarantee: This is less common than a bank guarantee and may apply when a
local entity is 100% owned by a major foreign company. French landlords only accept this type of guarantee
for well-established companies. Calling on such a guarantee in a foreign country can be diffcult and costly.
Insurance and Repairs: The tenant pays for insurance and for repairs to tenant areas.
TRANSACTION COSTS
Agency Fees
These rates vary according to market conditions.
New Lease in a Normal Market: The landlord and the tenant typically each pay 15% of the frst years rent +
VAT to their respective brokers. In a tight market with a very low vacancy rate and a shortage of quality supply,
landlords may reduce their agency fees, and the tenant may have to pay up to 30%.
Sublease: Fees are negotiable. No rules exist.
Lease Renewal: The occupier pays a fxed fee of 15% of one years rent + 20% of savings.
Legal fees depend on the need of information and fees are paid to legal frms which provide the services.
No other signifcant transaction costs, such as legal fees, stamp duty, registration fees, etc., apply.
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General
The commercial property market in France is governed by legislation passed in 1953. Commercial leases are highly
regulated and, to a considerable degree, standardized by French statute. This law was codifed on September 18,
2000, under Articles L.145-1 of the French commercial code.
Although no standard lease contract exists, most are relatively similar because much of the law is codifed. Lease
contracts are typically 1530 pages in length.
Right to Sublet and Assign
Subletting is rare because lease contracts are generally short. Subletting is usually restricted to less than 50% of the
premises and can normally only be rented to related companies. Assignment is normally only permitted if a company
is sold, and then only under specifc conditions.
Option to Expand
Not typically granted.
A tenant may negotiate a frst refusal for other space in the building.
Negotiable. A clause in the lease specifes the amount of indemnities. No laws address this.
Holdover by Tenant
The law does not address holdover. The parties usually negotiate a holdover penalty in the lease, typically in the form
of a 50100% rent surcharge. When a lease does not address holdover, a court can set the penalty amount.
Owners usually permit signage in common areas. Owners of single occupancy buildings may permit exterior signage
and the right to name a building if authorized by local planning authorities.
General
Use of Brokers
- Most users fnd premises via brokers, although not always on an exclusive basis. Most international compa-
nies, and more recently, French companies, use brokers on an exclusive basis. Exclusive basis means that the
occupier uses one agent, and the agent represents the users interests.
- In France, brokers can be paid by both the landlord and the tenant on a single transaction. Non-exclusive
agents typically favor buildings for which they represent the landlord, so as to collect two fees. CBRE Global
Corporate Services acts exclusively for occupiers.
Negotiating Process
- Mandate Agreement: French law stipulates that parties sign a mandate document (Mandat de Recherche)
when working on a real estate requirement, in order to ensure the occupier of an agents expertise and extent
of services. Property Agencies have a broker license from local authorities after verifcation of qualifcations,
clear criminal record, payment of insurance and fnancial guarantee. The occupier must provide certain
required information in the Mandat de Recherche at the beginning of an assignment to fnd and negotiate
space. The required information includes: type of company (occupier), fnancial capital of occupier, approxi-
mate area required, and location of requirement.
- Candidature Package: The client should provide the landlord with a company candidature package including:
(1) Financial data presentation of parent company and French subsidiary; (2) Last two balance sheets of parent
and local company; (3) Biography of top executives and CV summaries with photos; (4) Press review of articles
France
regarding competitors; (5) Information on the economic sector of the company (i.e., statistics, turnover, levels
of production, etc.); (6) Extrait K Bis (Certifcate of Incorporation) of company contracting lease; (7) Statuts
(Articles of Incorporation) of parent and local company; (8) RIB (Relev dIdentit Bancaire), which means bank
account details of the company taking the premises; (9) Other relevant information.
Transparency
Comparables, i.e., names of tenants, square meters, rents, description of building, etc., are generally available for
recent transactions in the Paris Region and in main markets elsewhere, although tenants, landlords, and agents
sometimes sign non-disclosure clauses to maintain confdentiality on rents and incentives.
Immostat, a property data management organization, created and fnanced by CBRE and other French real es-
tate companies, maintains a shared database and provides comprehensive statistics on a regular basis. Immostat
produces quarterly indicators for the Paris regional commercial property market. The press also publishes leasing
transactions.
Buildings are usually classifed as new, redeveloped, renovated, or second-hand.
Buildings are usually considered new or redeveloped for fve years from delivery.
No offcial building classifcation exists, such as Grade A, Grade B or Grade C in France, although such grades are
sometimes used informally, especially with international landlords and tenants.
Landlords identify buildings that have obtained an HQE (Haute Qualit Environnementale) Certifcate, i.e., buildings
certifed as green.
Developers also have a building classifcation which takes into account the construction quality.
CB Richard Ellis France
Giles Bateman
Director of Global Corporate Services France
+33 1 53 64 30 06
giles.bateman@cbre.fr
Aurlie Lemoine
Head of Research France
+33 1 53 64 36 35
aurelie.lemoine@cbre.fr
About CBRE France: http://www.cbre.fr/fr_en
For Local Market Reports: http://www.cbre.fr/fr_en/etudes
France
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GERMANY
Berlin
+49 30 72 61 54 0
Cologne
+49 221 17085 0
Dsseldorf
+49 211 86066 0
Frankfurt/Main
+49 69 17 00 77 0
Hamburg
+49 40 8080 20 0
Munich
+49 89 2420 60 0
LEASE LENGTH
Term
Most lease terms are for fve years with an option to renew for another fve years. Shorter leases are possible, and
subject to penalties if an early break option is exercised.
Termination
Options to terminate are rare.
Renewal
Leases of 510 years often include an additional fve-year renewal option.
Other Lease Options
Landlords in Germany do not grant break options that can be exercised before three years. A tenant that needs space
for a short time, such as two years, may have the following options:
The tenant typically signs a 5-year lease with an option to break the lease after (minimum) three years. The lease
typically specifes that if the tenant exercises this option, the tenant will pay a penalty equal to the non-amortized
ft-out costs plus the landlords additional costs; or a negotiable penalty amount.
A tenant can lease the space directly from the landlord as outlined above, and then sublet the space when it is
no longer needed.
A tenant can fnd a short-term sublease and become a subtenant.
A tenant can lease second-hand space short-term from a landlord directly with no ft-out work, although this is
rare.
CBRE OFFICES
DENMARK
POLAND
GERMANY
CZECH
REPUBLIC
AUSTRIA
FRANCE
BELGIUM
NETHERLANDS
LUX.
SWITZERLAND
Frankfurt/Main
Munich
Hamburg
Berlin
Dsseldorf
Cologne
SPACE MEASUREMENT
Defnitions
Some landlords quote net area; others quote gross area. Gross area and net area measurements normally follow
Gesellschaft fr Immobilienwirtschaftliche Forschung (GIF) guidelines. GIF is a real estate association, created to
standardize and improve real estate defnitions. Landlords are not required by law to quote space according to GIF
guidelines.
Effciency
A typical ratio of carpetable area to quoted area in a Class A building is 8085% in Frankfurt and Dsseldorf; 85% in
Munich. Effciencies depend on whether the landlord quotes on a gross or net basis and on the building confguration.
OCCUPANCY COSTS
Rent
Net Rental Quoted: Rent is typically quoted as EUR/sqm/month and payable monthly in advance.
Free Rent: In 2010, tenants could obtain up to 36 months free rent on a typical 5-year lease with an option to
renew for fve more years. Landlords normally give more free rent to large tenants than to small tenants.
Rent Escalation: The law allows landlords to escalate rent by indexation only for leases that allow a tenant to re-
main for ten years or more. Leases for fve years that include a tenants option to renew for fve more years also
qualify for indexation. Step-rent (i.e., fxed increases at fxed intervals) is occasionally used instead of indexation.
Building Repairs: The landlord pays for repairs to the structure, and does not pass the charges to the tenant.
Service Charges
The tenant pays service charges to the landlord for:
Services: Public rates for waste disposal, insurance, common electric, heat, cleaning of common areas, building
security, management fees, etc.
Water: Metered and paid in the service charge. At year-end, actual water usage and fnal costs are calculated,
and the tenant pays the landlord for the extra usage, or the landlord reimburses the tenant for the excess that
the tenant paid.
Property Tax: The property owner pays the property tax and recovers it from the tenant through service charges.
The amount depends on the propertys assessed value and a regional factor called Grundsteuerhebesatz B,
which varies from city to city.
Building Insurance: The landlord recovers the cost of insurance for the whole building from tenants through
service charges.
Utilities
Electricity: The tenant contracts with the electric company, which it pays directly.
Water: The tenant pays a service charge to the landlord for water.
Taxes
Property Taxes: The tenant pays property taxes to the landlord as a service charge.
VAT: The standard VAT rate in 2010 is 19%. Tenants pay VAT on rent, service charges, utilities, etc. Banks,
insurance companies and unincorporated associations do not pay VAT on these charges, so landlords typically
charge them a higher rent.
Landlord Work: A landlord typically performs ft-out or contributes a negotiable amount toward ft-out, typically
EUR 250300 /sqm in a Class A building, depending on the rental rate and the lease length. Tenants should
pay close attention to the quality of ft-out that a landlord is prepared to provide.
Tenant Work: In the past, landlords rarely provided a cash allowance for ft-out and tenants rarely engaged
or paid contractors directly. However, as international landlords and tenants have entered German markets,
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some allow tenants to hire contractors directly, Landlords usually allow tenants to use a tenants architect and
engineers, subject to the landlords consent, and normally charge no fees to review design documents.
Fit-Out Costs: Fit-out costs for Class A or Prime buildings in major cities normally range from EUR 7501000
per square meter, including construction, furniture, wiring, design fees, etc. Fit-out costs may vary by 1020%
from one major city to another.
Restoration
Tenants normally must remove tenant-installed improvements at lease expiration, but this is negotiable in the lease.
When required in the lease, landlords sometimes waive this requirement if the improvements are of value.
Most tenants provide a bank guarantee, typically equivalent to three months gross rent, and sometimes equivalent
to 612 months from a start-up company.
Car Parking
Spaces are allocated and stipulated in the main contract or separate contract, and are paid monthly.
Cleaning of Tenants Premises: Tenants, not landlords, hire and pay a cleaning company to clean the premises.
Insurance for the Leased Premises.
Repairs to the space within the leased premises.
TRANSACTION COSTS
Agency Fees
Under German law, an agent earns a fee for simply introducing the availability of a property: via registered letter,
physical viewing, or any other provable means. Traditional German agents provide no analysis, negotiation as-
sistance, etc., beyond introduction. CBRE, however, provides these services.
VAT (19% in 2010) is always added to agency fees. Even if a client is located outside of Germany, VAT is required if
the service is provided in Germany.
New Lease: A typical agency fee on a 5-year lease in major German cities is equivalent to three months net
rent, which is 5% of the rent for the lease term. Hamburg is an exception, with a typical agency fee of three
months gross rent. In most cases, agency fees are fxed, but sometimes are negotiable, depending on the size
of a deal and volume of the transaction and lease length. The tenant has historically paid agency fees, but in the
tenant market of 2010, landlords paid them in most cases. When separate brokers represent the landlord and
tenant, the fee is divided on a 5050 basis.
Sublease or Assignment: The sublessor usually pays 34 months net rent.
Legal fees: Tenants should engage and pay a lawyer to review the lease contract. By German law, real estate
companies like CBRE are not allowed to give any legal advice. Only licensed lawyers are allowed to give legal
advice.
The Civil Code, called Brgerliches Gesetzbuch, or BGB, sets standard terms for leases. Parties are free to enter into
contracts with additional provisions that do not confict with the Civil Code or other laws. However, it is common to
enter into contracts with few or no additional provisions.
Right to Sublet
Subleasing is common, and requires the landlords approval.
Option to Expand
An option to expand is rare, but tenants may negotiate a right of frst refusal.
Germany
Late Delivery by Landlord and Holdover by Tenant
This is negotiable, as agreed in the contract.
Negotiable; depends on the building.
General
Cooling Systems: Many modern offce buildings in Germany have a cooling system, such as concrete core cool-
ing, instead of air conditioning. Some cooling systems use ground water brought up from deep in the earth to
heat in winter and cool in the summer. Other cooling systems circulate river water for cooling. A cooling system
allows the temperature to be controlled within limits, typically up or down by three degrees Celsius, whereas the
air conditioning enables the temperature control beyond these limits.
Natural Light: German laws require natural light in working areas, although they do not specify a minimum
distance to a window. Conference rooms and other shared areas do not need natural light.
Minimum Area per Workstation: German law does not specify a minimum area per workstation. Workspace
must have a suffcient foor space and, depending on the size of the foor area of the room, suffcient clear
height to provide employees with work environment that does not impact employees safety, health or well-being
negatively. However, eight square meters is considered a benchmark for a suffcient area per workstation.
Transparency
Detailed information on transaction terms is confdential, although agents sometimes obtain data on transactions
from competitors or the press.
The classifcation provided below considers ft-out and technical specifcations, but not services provided.
Class A Buildings (Prime Buildings): These were typically constructed in the 2000s, with very high quality design
and fnishes, carpeted raised foors, modern cooling systems (e.g. concrete core cooling), a foor confguration
that provides for a fexible foor plan layout, fully equipped kitchens in each foor, modern elevators, etc. They
are located near transportation links.
Class B Buildings: These typically have some, but not all, Class A features and must have elevators. Many were
constructed in the 1990s. Some lack internal design fexibility.
Class C Buildings: These are hardly marketable, with functional but outdated fttings. Offce buildings without
elevators are Class C.
Green Buildings
Energy Performance Certifcates: Energy effciency in offce buildings is becoming increasingly important.
Energy performance certifcates indicate a buildings energy effciency. From July 2009, owners of com-
mercial buildings must obtain an energy performance certifcate (Energieausweis) before a new letting takes
place or before a building is sold. These certifcates are required by German Energy Savings Ordinance
(Enenergieeinsparverordnung, EnEV, 2009) which is part of the German building law.
Energy saving regulations (EnEV) include technical specifcations for new and existing residential buildings and
offce buildings. In 2012, energy requirements will be tightened.
The most commonly used green building standards in Germany are: LEED, awarded by the U.S. Green Building
Council and a certifcation by DGNB (Deutsche Gesellschaft fr Nachhaltiges Bauen), both of which offer various
certifcation levels. Many newly constructed buildings by default fulfll the requirements of LEED silver certifca-
tion, as the construction standards are very high. Several buildings of various uses have undergone renovation
in order to become green. Many building owners increasingly seek LEED certifcation in addition to DGNB,
because LEED certifcation is better known internationally.
Germany
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CB Richard Ellis, Germany
Dr. Jan Linsin
Director, Head of Research Germany
+49 69 17 00 77 663
jan.linsin@cbre.com
Monika Kowanska
Analyst
+49 69 17 00 77 636
monika.kowanska@cbre.com
About CBRE Germany: http://www.cbre.de/de_en
For Local Market Reports: http://www.cbre.de/de_en/research
Germany
GHANA
Broll Ghana (Part of the
CB Richard Ellis Network)
+233 21 669852
Accra (Head Offce)
+233 21 673474
Accra (Accra Mall Offce)
+233 21 823040 / 2
LEASE LENGTH
Term
Lease periods generally range from 210 years. Tenants are able to structure long leases, with rent reviews subject to
an agreed pattern and formula, which the lease agreement specifes. However, landlords generally prefer short lease
lengths to enable them to renew rents upward, whereas tenants generally prefer longer leases to give them security
of tenure.
In a weak economy, such as in 2009 and 2010, tenants tended to dictate the terms, and could typically negotiate
terms of 510 years, and up to 25 years, especially in buildings where the tenants make substantial improvements.
In a strong economy, landlords tend to dictate the lease terms, especially the lease length. With new leases of 25
years, the frst years full rent is paid in advance, and thereafter quarterly, half-yearly, or yearly, as negotiated. In
exceptional cases, landlords may demand two years rent, typically in strong markets or when the landlord will make
property improvements prior to lease commencement.
Leases of land from the government for commercial purposes typically extend 2550 years, with an option to renew
for the same duration or less.
Termination
Both landlords and tenants have the option to terminate the lease upon giving the requisite notice period; three
months for short leases and six months for long leases. The Tenancy Agreement usually addresses the process of
termination, and provides for penalties when the process is not followed.
Renewal
An option to renew is negotiable as part of the review clause in a lease, which is subject to negotiations.
SPACE MEASUREMENT
Defnitions
Net Internal Area: Offce buildings are usually measured based on net internal area (also known as effective
foor area), i.e., the area available for offce use. No specifc guidelines govern this, but measurements generally
follow international standards.
AFFILIATE OFFICES
BURKINA FASO
GHANA
CTE
D'IVOIRE
MALI
BENIN
T
O
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O
Takoradi
Accra
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Gross External Area: Industrial properties are usually measured using gross external area. The gross external
area is measured to include the outside walls of the building or foor.
OCCUPANCY COSTS
Rent
Quoted Rents: In 2010, landlords usually quoted rents for commercial properties in U.S. Dollars (USD) per
square feet per annum or square meters per month, depending on location.
Currency for Rent Payable: Rents are normally stated in U.S. dollars which is payable either in the local
Ghanaian currency, the cedi (GH or GHC) converted at the prevailing inter-bank exchange USD rate at time of
signing the agreement, or paid in USD as a hedge against infation.
Free Rent: Landlords commonly grant 13 months free rent for tenant ft-out.
Rental Payment: Typically, rents are payable quarterly, half-yearly or annually in advance. No Value Added Tax
(VAT) is charged on rent. However, the government has proposed a Rent Tax of 8% on all rents payable to the
landlord. The tenant by law is required to deduct the rent tax unless the landlord produces a valid certifcate
from the Internal Revenue Services.
Rent Advance: Tenant pays three months to two years rent in advance. However, rent advance currently being
achieved is typically 12 years, depending on the landlord and whether the rent advance is needed to complete
the building. The tenants only protection is with the courts, or arbitration, or, as a last resort, to withhold further
rent payment as leverage.
Rental Escalations and Review Periods: Commercial leases provide for periodic rent reviews at an agreed annual
percentage increase, typically between 810%, occasionally up to 20%. Longer leases provide for a review of
rent at fve-year intervals. If the tenant leases bare land, the rent is considered commercial rent, and hence rent
is reviewed as with commercial leases. Government properties provide for rental reviews on a two-yearly basis.
Operating Costs
Operating costs are also called Common Area Maintenance (CAM) or Tenant Service Charges (T/S). This is a tenants
proportional contribution toward building maintenance and services, based on the tenants demised area under the
Tenancy Agreement.
CAM (T/S) are quoted with rents during lease negotiations, charged as an additional cost per square meter per
annum, and subject to quarterly, half yearly or annual reviews, depending on the state of the economy. The reviews
are therefore undertaken to refect changes in key economic indicators such as infation, interest rate, operating costs,
and the Ghana Cedi performance against foreign currencies, especially the U.S. dollar.
Operating costs generally include, but are not limited to, general maintenance, cleaning and waste management,
elevator maintenance, supplies including generator fuel, security cover, horticulture, maintenance of back up genera-
tor and facilities management fee. If generator fuel costs increase, tenants contribute towards paying the increase.
Taxes
No Value Added Tax (VAT) is charged on rent. However, the government has introduced a Rent Tax of 8% on all rents
payable to the landlord.
Utilities
Electricity: Tenants pay for electricity to the landlord or to the electric company, depending on how the building
was developed. In most commercial buildings, the landlord pays for electricity and recovers the costs by way of
service charge. Recently, however, due to the increases in utility charges and to minimize the risk to the landlord,
buildings have separate electricity meters for each tenant on a prepaid arrangement, and only the electricity for
common areas is recovered through the service charge.
Water: In multi-tenant buildings, the landlord pays for water and recovers its cost by way of the service charge.
Due to the unreliability of water from the utility company, landlords develop reservoirs and recover the cost of
supplying water from the tenants.
Ghana
Fit-Out
Buildings are normally fnished with air-conditioners, tiled foors, suspended ceilings, trunking electrical outlets, light-
ing, etc.
Tenants pay all ft-out costs. Fit-out cost normally applies to internal fxtures and fttings carried out purposely for the
tenants occupation.
Fit-out costs for Class A or Prime buildings in major cities normally range from USD 350500/sqm including con-
struction, furniture, wiring, design fees, etc. In Ghana, fees and costs are quoted either in USD or GHC.
Restoration
Tenants normally must reinstate the property to a tenantable state before exiting or vacating the demised premises.
A typical security deposit of 13 months rent is required and paid back to the tenant on exiting or vacating the
demised premises if there is no outstanding repair liability or tenant breaches, such as rent arrears.
Car Parking
Car parking is normally included in the rent.
No other signifcant occupancy costs generally apply.
TRANSACTION COSTS
Agency Fees
With Sole Agency, as defned in Ghana, the agent provides exclusive agency services. Each party solicits its agents
services and pays the agent fee. With dual agency, as defned in Ghana, the landlord or tenant solicits the services of
more than one agent for the same service.
New Lease: Sole agency or dual agency fee (typically between 57%) of the entire rent payable. The fee in some
cases can be as low as 2.5% depending on the size of space and passing rent.
Sublease: Subleases are occasionally done, with fees similar to fees charged on new leases.
Lease Renewal: Fees are typically between 50100% of one months rent, and are negotiable.
General
Generally there are standard lease terms recognized by the courts.
All leases are supposed to be stamped and registered with the Lands Commission or with the courts by way of oath
of proof which is a legal recognition of the parties who have entered into the lease agreement.
Standard leases are used, generally with some variation to refect special circumstances and nature of the landlord.
Right to Sublet
Subletting is permissible, but should be with the consent of the landlord which should not be unreasonably withheld.
Late delivery by landlord is usually covered by penalty clauses in favor of tenants, but is not normally enforced unless
the transaction involved international or corporate organizations.
Holdover by Tenant
Leases do not effectively cover holding over by tenant; and so eviction and other penalties require court action.
Negotiable and is normally addressed in the lease or with a separate side agreement.
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Transparency
Generally, information on rentals in Ghana is not disclosed, except with large corporate rental properties. Most
private property owners generally do not disclose rents to avoid paying the right level of taxes. Most foreign frms
occupy space within large corporate rental properties, although many have taken occupation in converted residential
properties in prime locations due to the lack of availability of offce space in the capital.
No formal rule or regulation exists to classify buildings in Ghana. However, properties can be informally classifed by
building quality, facilities and services provided, age, and electrical and mechanical installations:
Grade A: Properties in prime locations have good mechanical and electrical installations, i.e., standby generator
set, lifts (elevators), air conditioning, CCTV, access control, fre fghting equipment, and offer FM soft services
such as security, janitorial or landscaping (horticulture). Most properties have split air-conditioners and not
central systems. Split A/Cs are separate or individual units without door units.
Grades B and C: Properties without most of the Grade A facilities and are located in less attractive areas. These
buildings tend to be in need of refurbishment.
Broll Ghana
Mr. Kof Ampong
Chief Executive Offcer
+233 21 673474
kampong@brollghana.com
About Broll Ghana: www.brollghana.com
Ghana
GREECE
Athens
Atria Property Services SA /
CB Richard Ellis
+30 210 3603667
Axies SA / CB Richard Ellis
+30 210 3606181
Thessaloniki
Atria Property Services SA /
CB Richard Ellis
+30 2310 279248
Axies SA / CB Richard Ellis
+30 2310 241877
TURKEY
BULGARIA
ALBANIA
GREECE
THE FORMER
YUGOSLAV REPUBLIC
OF MACEDONIA
Thessaloniki
Athens
LEASE LENGTH
Term
Commercial real estate leases are statutorily 12 years long, with an option to extend the lease for four more years.
After a 12-year lease expires, the landlord has the right to require the tenant to move within a period of nine months
and pay the tenant a penalty of 24 months rent; or else to allow the tenant to exercise an option to extend the lease
by four more years.
Termination
The commercial landlord and tenant law changed on June 17, 2010. Tenants now have the right to terminate their
leases at any time after the frst twelve months of the lease, with three months notice and a penalty equal to one
months rent.
The law also temporarily repeals tenant break waiver agreements made before the law came into effect, thus allowing
tenants to terminate their leases with break rights in accordance with the new law. Lastly, the law permits tenants in
listed buildings (i.e., historic buildings that cannot be demolished without permission) to terminate their leases with
the same provisions as standard commercial leases.
The law states that the clauses on break waiver agreements and listed buildings will only apply until the end of
December 2012, after which the previous legal provisions will apply.
Renewal
As set out above, a tenant has the right to a 4-year extension of the original lease term. Tenants have no right to
renewal on expirations of 16 years.
SPACE MEASUREMENT
Defnitions
Gross external area (GEA), in square meters, is the most common basis of measurement in multi-tenanted build-
ings and in buildings with a single tenant. Landlords usually quote on the basis of GEA. The gross external area
equals the net internal area (NIA) plus internal and external walls, common areas and columns, and common
areas.
AFFILIATE OFFICES
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Net internal area is used by international occupiers when analyzing alternative offce solutions. It includes toilets,
kitchens and tenant IT rooms, but does not include external walls, common areas or columns.
Effciency
A typical ratio of net internal area to gross external area can be 7590%, depending on the size of the foor plates
and structural elements.
OCCUPANCY COSTS
Rent
Recent Rental Rates: Please visit CBRE Global Knowledge Center: http://gkc3.cbre.com/search/search.aspx
Rent Quoted: Rent is quoted on a net basis in EUR/sqm/month.
Rent Payable: The tenant usually pays rent monthly in advance.
Free Rent: Rent-free periods are usually less than 3 months.
Rent Escalation: Rent adjusts annually, usually at a rate equal to CPI+1%.
Costs Landlord Normally Pays: The landlord pays for structural building repairs and property ownership tax. The
landlord normally pays to insure the building structure.
Operating Costs
The tenant pays service charges to the landlord for all common area operating costs: cleaning, security, electricity,
water, etc. Charges vary each month, according to actual expenses.
Taxes
Municipal Duty: The tenant customarily pays a municipal real estate duty, which varies in each municipality. The
municipal duty pays for garbage collection and other municipal services.
Value Added Tax: VAT may replace the stamp duty on certain types of shopping center leases. Service charges,
construction, and other costs typically include VAT.
Utilities
Maintenance and Operating of Premises: The tenant typically pays directly for maintenance and operating
expenses of its exclusive premises, including cleaning and utilities. If the premises are part of a larger property,
certain utility costs may be submetered and paid to the landlord.
Fit-Out
The landlord usually performs ft-out work for small and medium-sized premises. The ft-out cost and payment are
negotiable and can be shared.
Fit-out costs for professional offce spaces in existing buildings in Athens range from EUR 200400/sqm.
These ranges include raised foors, suspended ceilings, partitions, mechanical and electrical works and joinery works,
i.e., doors, kitchen units, etc.
Restoration
At the end of the lease term, tenants are usually required to restore the property to its original condition, excluding
normal wear and tear.
The tenant usually pays a two-month deposit. Start-up companies may be required to provide a larger deposit, or
guarantees, or both. In build-to-let agreements, guarantees may be considerably higher.
Car Parking
When available, tenants rent spaces on a per-space basis.
Offce leases are subject to a 3.6% stamp duty, which the tenant normally pays. This is a monthly cost. The tenant pays
an additional 3.6% on top of the monthly rent. The landlord then pays this to the tax authorities.
Greece
TRANSACTION COSTS
Agency Fees
International companies typically engage their own agents. Fees are negotiated and agreed to beforehand, and
depend on the property, location, time of leasing, services provided, etc.
New Lease: Agents generally receive 8.3315% of the frst years rent from the landlord or tenant or both. In
exclusive appointments, the client normally pays the agent except when both parties retain the agent, in which
case disclosure and arrangements are made to avoid a confict of interest. In non-exclusive appointments,
agents usually act as intermediary agents and take fees from both sides.
Lease Renewal: Renewals are negotiable. Agency fees are usually based on a percentage of the new rent.
Sublease: Subletting is unusual. Agency fees are negotiable.
Tenants pay negotiable legal expenses for lease preparation and review, typically on an hourly rate or an agreed
lump sum.
General
Offce leases fall under the broader category of commercial leases. Lease law is set by statute.
Standard leases are not normally used.
Subleasing
Most leases do not give the tenant the right to sublet to third parties. Subletting to subsidiaries or associated compa-
nies is normally allowed.
Building Security
Building security, if available, is part of additional CAM expenses.
Local laws prohibit or limit external signage in certain locations.
Leasing Process
Generally, landlords and tenants do not have preliminary agreements, but occasionally the landlord and the tenant
either use a Heads of Terms agreement or sign a Memorandum of Understanding before working out terms of the
fnal contract.
A Heads of Terms agreement is a document with which two or more parties agree to general terms of a contract,
i.e., monthly rent, annual rent increase, etc. It is considered a frst step, at which time the landlord removes the
property from the market, the prospective tenant stops searching for alternatives, and both cooperate by prepar-
ing details of the fnal contract. It is not legally binding but subject to contract.
A Memorandum of Understanding is a document in which two or more parties agree to issues they will discuss,
i.e., confdentiality, prices, end of negotiation period, etc.
Transparency
Data on comparable deals that identify tenants, square meters, rents and incentives for recent transactions are not
always available.
The characteristics of a prime offce are:
New construction, less than ten years old or newly refurbished.
Raised foors.
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Suspended ceilings.
At least two lifts, stairs and emergency fre stairs.
Full Heating Ventilation Air-Conditioning (HVAC).
Category 5+ cabling.
IT rooms within tenant demise with space for servers and other IT equipment.
Floor plates of over 500 sqm.
Regular confguration.
Good quality reception and common areas.
Male and female WCs and kitchenette on each foor.
Clear internal height not less than 2.50 meters.
Strong commercial location.
At least one parking space for every 65 sqm of offces.
Good road and motorway connections.
Good access to public transport, train, metro.
PURCHASE AND SALES
Domestic offce occupiers and some international occupiers own buildings or condominiums. Below are costs related
to ownership:
Agency Fees
Agents receive 1.53% on purchase/selling price.
Notarial and Transcription Fees
Property is transferred through a contract signed in the presence of a notary (notarial deed). Notarial fees typically
are 1.2% of the value of the contract. The new deed must be transcribed on the title at the land registry and a fee of
0.45% of the value of the property is payable for the transcription.
Old Properties (Pre-2006 Permits) Transfer Tax
The transfer tax is 9% (+0.27% municipal tax) on the frst EUR 15,000 of property value and 11% (+0.33% municipal
tax) on the remaining value as long as the property was not transferred once after January 1, 2006. If a property
was transferred once since January 1, 2006, the subsequent transfer is subject to transfer duty of 1%. The transfer
of shares on company transactions is taxed at 5% of the higher of their value or of their notional taxable value as
calculated by the tax authorities, normally covered by seller, but frequently agreed to be covered by buyer.
New Properties VAT
Properties with building permits issued after January 1, 2006, are not subject to Transfer Tax but are subject to VAT
19%.
Other Taxes Relevant to Occupiers
Any further transfer of real estate after 1/1/2006 is subject to the real estate capital gains tax, if the seller initially
acquired it through transfer, inheritance or donation of the property after 1/1/2006. The tax is imposed on the actual
proft for companies, while for individuals on the notional proft between the objective value at the time of acquisition
and at the time of disposal. The individuals capital gains tax rate is determined as follows:
20% if the transfer takes place within fve years from the real estates acquisition.
10% if the transfer takes place between fve and 15 years from the real estates acquisition.
5% if the transfer takes place between 15 and 25 years from the real estates acquisition.
No capital gain tax is imposed on transfers that take place 25 years or more from acquisition.
There are specifc exemptions from the real estate capital gains tax, mainly for public legal entities, for legal or natural
persons who carry out a business of constructing and selling buildings whose profts are subject to income tax, as well
as for legal entities whose capital gain is subject to normal income tax.
Greece
CB Richard Ellis, Greece
James Ward MRICS
International Client Services
+30 210 3603667
james.h.ward@cbre.com
About CBRE Greece: http://www.cbre.gr/gr_en
Greece
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HUNGARY
Budapest
+36 1 374 3040
UKRAINE
ROMANIA
SLOVENIA
SLOVAKIA
POLAND
HUNGARY
SP.
CZECH REP.
CROATIA
BOSNIA
& HERZ.
AUSTRIA
SERBIA
Budapest
LEASE LENGTH
Term
Offce leases are for a minimum of three to fve years, often with a renewal option.
Termination
Some leases give the tenant one or more break options. Historically, break options were not typical, but nowa-
days landlords tend to provide them.
Most leases with break options require the tenant to pay a penalty if the tenant exercises a break option.
Break penalties typically depend on the length of the original lease and the amount of time remaining on the
lease when the tenant exercises its break option.
A typical 5-year lease can include a break option at the third year, with an average penalty of six months.
Leases with break options are normally at a slightly higher rental rate than leases without break options.
Renewal
An option to renew is subject to negotiation.
SPACE MEASUREMENT
Defnitions
Gross offce areas are quoted. The gross offce area = the tenants space only (net area) + add-on (common areas,
shared restrooms). Vertical circulation or technical shafts are not included in gross area in Hungary.
Net Area: The internal offce space, which excludes exterior walls and technical shafts but includes interior walls in
the tenants area.
Effciency
A typical add-on factor from net area to gross area is 8% and thus a typical ratio of net area to gross area is 92%.
CBRE OFFICE
OCCUPANCY COSTS
Rent
Rent Quoted: Rents are normally quoted as net rental in EUR/sqm/month plus VAT.
Rent Payable: Rent and service charges are normally payable monthly or quarterly in advance. Quoted rents
refer to the gross area, as defned above.
Rent-Free Periods: Three to six months is typical, depending on the occupier, lease length and ft-out.
Rent Escalation: In every contract, rent is usually adjusted annually to the Euro using MUICP, (Monetary Union
Index of Consumer Pricing) or HICP (Harmonised Index of Consumer Pricing) indices.
Service Charge
A typical service charge ranges from EUR 3.54.5 per square meter per month. The service charge covers:
Maintaining Common Areas and Services: This includes the tenants proportionate share of operating, maintain-
ing, cleaning of common areas, security and repairs, air conditioning, plumbing, drainage, sewage, fre preven-
tion, elevators, and building telecommunication systems.
Property Tax: The property tax is included in the service charge. Its rate is assessed according to the districts
regulations, based on size and use. On buildings, the rate is between EUR 34/sqm/year.
Property insurance for the building.
Property Management: 35% of annual rent.
Building Security: The service charge covers service costs, such as 24-hour reception and security service.
Facility Management: 1% of annual rent. Facility management is similar to property management, however the
term, facility management, applies in Hungary to more complex offce sites or if a tenant occupies more than
one building.
Taxes
Property Tax: Property tax is part of the service charge.
Value Added Tax (VAT): For offce space leases, VAT is 25% of the monthly rent and service charge.
Utilities
- Electricity: The tenant pays for electricity consumption based on a meter, except for electricity that operates
the air conditioning system, which is included in the service charge. For a Grade A building, electricity and air
conditioning are provided 24 hours a day at no extra charge, and are paid as a part of the service charge.
- Water: The tenant pays for water consumption based on a meter.
- Telephone and Data Lines and Cabling: The landlord provides a building telephone station and telecom-
munication cables to a connection point on the premises. The tenant contracts for telecommunications services
and wiring of premises. The landlord provides channels for cabling systems within the premises and installs
electrical outlets.
Fit-Out
Landlord Work: The landlord normally offers a good standard installation, based on a space plan agreed upon
with the tenant; typically with a ratio of open to enclosed areas of 70% to 30%, suspended ceilings, ceiling
lighting, standard restrooms, and some gypsum walls. However, landlords typically offer cash contributions of
EUR 5080 per sqm, in addition to the standard ft-out.
Tenant Work: The tenant pays the remainder of ft-out costs including upgrades, furniture, IT wiring, and design
and engineering.
Fit-out Cost: Fit-out construction costs for Class A or Prime buildings normally range from EUR 150200 per
sqm which the developer or landlord pays as part of the standard ft-out. It covers air conditioning, lighting, walls
for a 3070% split of open space to cell (i.e., private) offces.
A cash deposit or bank guarantee equivalent to three months gross rent on average is payable. Some landlords may
also require a parent company guarantee.
Hungary
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Cleaning of the tenants premises.
Insurance Cost: Generally, the tenant pays for third-party insurance and building and property insurance, as
part of the service charge. Tenants typically have their own liability insurance.
Car Parking: One parking space per 100 sqm of offce space is typical in CBD. Elsewhere, one parking space
per 5075 sqm of offce space is typical. This ratio depends on building location (CBD or Non-Central) and
availability of parking spaces.
TRANSACTION COSTS
Agency Fees
Each party pays its agent separately. The law prohibits agents from representing both parties. An agent works either
on the landlords or on the tenants side.
New Lease or Renewal: Landlords pay 820% of the average annual rent over the term for offce, storage and
parking space, excluding the service charge. The tenant pays its agent 1015% of the average annual rent over
the term plus a base fee, sometimes with an incentive payment if the agent negotiates a specifed rent. In some
cases the agent is paid based on the savings negotiated for the tenant.
Sublease: Sublessor typically pays 1216% of the average annual rent if the agent successfully subleases the
space. Subtenant pays if represented (as offcial tenant-representation) but this is rarely the case.
Legal fees to the tenants lawyer are negotiable. No stamp duty exists.
General
Lease agreements are contracts that are regulated by the Civil Code and other legislation that covers commercial and
residential leases. If either party breaches the lease contract, these laws clearly state the outcome.
There are no standard lease contracts. The landlords solicitors prepare a lease contract.
Subletting
Subleasing is common, subject to landlord approval.
Option to Expand
Owners occasionally provide a short-term expansion option (i.e., six months), with a charge for such option.
The landlord normally grants this, cost-free, throughout the lease term on adjacent areas in the building.
Consequences for delays caused by the landlord are negotiable. However, for delays caused by the tenant, the tenant
pays rent for each day of delay.
The landlord provides general signage at the building entrance on each foor. Larger and special signage usually
requires the permission of local authorities.
General
The tenant and landlord may, but are not required to, sign either a non-binding Letter of Intent, or a Preliminary
Agreement, which obligates parties to conclude a contract.
Hungary
Transparency
In Budapest, as in other Central European cities, like Prague and Warsaw, CBRE and other large international real
estate companies belong to a property forum which collects offce-leasing information, maintains a shared database,
and publishes non-confdential information, such as stock, take-up, vacancy, and demand. They do not share or
publish sensitive and confdential information, such as rental levels and agency fees.
Class A Buildings
New or reconstructed offce building.
4-pipe HVAC or similar system.
Raised foors or suspended ceilings.
Slab-to-slab height of 3.6 meters or better (no less than 2.7 meters from top of fnished foor and to suspended
ceilings).
Suffcient underground parking.
Advanced building management and security system.
Excellent utility capacity.
Modern high-speed elevators of suffcient capacity.
International standard property management; professional, experienced landlord.
Proper legal documentation.
Class B Buildings
Older, partly or non-refurbished buildings.
With or without air conditioning units.
Less effcient foor plates.
24-hour security.
Parking spaces.
Experienced landlord.
Local property management.
Some building amenities.
CB Richard Ellis, Hungary
Rita Tuza
Research Analyst
+36 1 374 3040
rita.tuza@cbre.com
About CBRE Hungary: http://www.cbre.hu/hu_en
Hungary
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IRELAND
Dublin
+353 1 618 5500
NORTHERN
IRELAND
(U.K.)
IRELAND
Dublin
LEASE LENGTH
Term
Terms have traditionally been 2025 years, with one or two break clauses, often at the end of years 10 and 15, sub-
ject to 612 months notice and 612 months rent penalty. However, in light of the recent and continuing economic
downturn, tenants are demanding more fexibility and shorter leases with break options at the 5
th
and 10
th
years.
Break
In suburban offce markets, break clauses are common, with tenant break options at the 10
th
or 15
th
year or both,
subject to 612 months notice, and in some cases 612 months rent penalty.
Renewal
The law gives commercial tenants that have been in continuous occupation for fve years an automatic right to a new
lease when the existing lease expires. Tenants can contract out of this right, but must receive independent legal advice
for this to be valid. Most short-term leases last four years, nine months, because most tenants get automatic renewal
rights after fve years. Leases shorter than four years, nine months are rare.
SPACE MEASUREMENT
Defnitions
Measurement terms used in Ireland are generally the same as in the U.K. because the code in Ireland follows the
U.K. practice.
Net internal foor area is the basis for measurement of offces in city centers and docklands, and for retail
units. It includes only occupied offces, desks, offce equipment, etc. It excludes stairwells, toilets, corridors, etc.
The term net internal area in Ireland has the same meaning as the term carpetable area in the U.S. and
elsewhere.
Gross internal foor area is the basis for measuring suburban offce space. Areas included are stairways, lift
shafts, corridors, etc., and are included in addition to net internal area.
CBRE OFFICE
Gross external foor area, which is rarely used today, includes area from the outside face of the buildings wall,
to the inside of the building including corridors, toilets, etc. It was the standard for measuring industrial premises
in Ireland.
Effciency
A typical ratio of net internal area to gross internal area in a Class A building in the suburbs is 8085%.
OCCUPANCY COSTS
Defnitions
Full Repairing and Insuring (FRI) Leases: Most leases on prime property in Ireland are on full repairing and
insuring terms, which passes the cost of nearly all outgoings to the occupier as service charges, charged sepa-
rately from the base rent. With a FRI lease, the tenant is responsible for all the ongoing repairs and insurance
for the building, but is not responsible for building improvements. When a tenant hands back the property, the
tenant is normally responsible for putting it back to the state in which it was delivered. If a tenant takes a lease
by assignment from another tenant, the new tenant is responsible for all outstanding repairs. Therefore it is wise
to have the property surveyed before taking on a lease.
Outgoings: Outgoings are expenses in addition to rent, and include all expenses covered in the service charge
plus property taxes, such as electricity and other utilities.
Rent
Quoted Rents: Rents are generally quoted as net rental in EUR/sqm/year.
Rent Payable: Rent is paid quarterly in advance.
Incentives: Landlords may offer free rent, free car-parking spaces and break clauses, but rarely pay a tenant
improvement allowance.
Free Rent: Rent-free periods are negotiable and a common incentive used by landlords to persuade tenants to
sign a lease. The value of the incentive offered depends on general market conditions, the quality of the tenant
taking the lease, and the length of the term. Rent-free periods vary signifcantly, but it is typical in Dublin in 2010
to be able to secure one to two months rent-free per year for each year of a new lease.
Rent Escalation: In most cases, rents are reviewed every fve years. Normally, the lease states that new rent
should be on the same level as the open market rental value of property. Most leases are on an upward-only
basis, which means that rent remains the same if market rents fell since the last review. As of 2010, the Irish
Government has introduced legislation on banning upward-only rent reviews.
- Arbitration: Leases typically provide that the landlord and the tenant enter into formal arbitration if they
disagree on the open market rental value during the term of the lease. They put forward their arguments to
an appointed arbitrator or expert witness who decides the new rental level. Normally, professional property
consultants represent landlords and tenants, and the arbitration process takes the form of either written
submissions or an oral hearing. Once the arbitrator makes a decision, it is fnal and cannot be appealed
except on a point of law. One cannot appeal on grounds that the new rent is too high, but can appeal if the
arbitrator did not follow proper procedure. Normally, the landlord and tenants representatives at arbitration
are each paid 5% of the revised annual rent. The costs of arbitration are usually shared equally between the
landlord and the tenant.
- Resolution through courts: If the tenant has a right to remain when the term of the lease ends, and if the
parties disagree on a market rent for the extension period, a resolution is normally found through the courts
rather than arbitration.
Service Charge
In a multi-tenanted building, every tenant pays a service charge which is a pro rata share, according to the tenants
proportion of the total space leased in the building. The service charge normally covers these outgoings:
Cost of managing and operating the building including building security.
Cleaning and general upkeep of the building, but not the tenants premises.
Ireland
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Sinking Fund: Tenants normally pay into a sinking fund that landlords can use later for major repairs, such as
replacing a lift. The landlord has some discretion in deciding how the sinking fund is used, and can sometimes
be used for capital improvements, such as refurbishing the lobby, improving landscaping, new windows, etc.
Building Insurance: This is usually, but not always, covered in the Service Charge, and varies from building to
building.
Taxes
Local Authority Rates: The property tax is known as local authority rates. Tenants in Ireland pay an annual rate
charge on their occupied premises, based on a complex formula. The charge depends on local authority. EUR
60 per square meter is a typical rating cost for most modern buildings in Dublin. Charges are typically lower in
provincial locations.
Value Added Tax (VAT): The VAT on annual rent is 21%. Typically, if a company is registered for VAT, this can be
re-claimed. If a company is not registered for VAT, the landlord has the option not to charge VAT on the rent, but
this creates an additional liability for the landlord.
Utilities
Electricity: The tenant pays electricity either to the Electricity Supply Board (ESB) based on the ESBs meter, or to
the landlord based on the landlords meter. In Ireland, the electricity charge is not based on the amount of space
occupied and is not included in the rent.
Water: The tenant pays for water through the local authority rates (equivalent to a property tax).
Fit-Out Costs
Landlord Work: Restrooms, ceiling, ceiling lighting and raised access foors are typically considered landlord
work and are considered part of the shell.
Tenant Work: Tenants usually pay for ft-out and may use their own architects, engineers, and contractors,
subject to landlord approval. The landlords mechanical and electrical engineers typically review plans and
specifcations. The tenant pays for this review.
Fit-Out Costs: For Class A or Prime buildings in major cities these normally range from EUR 5501100 per sqm
including construction, furniture, wiring, design fees, etc.
Restoration
The lease describes a tenants obligations. The tenant usually must restore the premises to its original state at expiry,
but this is negotiable. Generally, a tenant will have improved the premises, but any redecoration or damage must be
made good, usually with a cash payment. Occasionally, parties agree in the lease that certain improvements can be
left behind.
Landlords typically only seek rental deposits where companies are not of signifcant standing or cannot offer the ap-
propriate parent company guarantees. Landlords commonly seek parent company guarantees if a tenants fnancial
covenant is in doubt.
Car Parking
Some leases include car spaces in the base rent, while others charge rent for them separately. Car parking spaces
typically rent for about EUR 4000 per year in prime city centers and EUR 10001500 per year in the suburbs.
TRANSACTION COSTS
Agency Fees
Most landlords and tenants retain agents.
New Lease: Both the landlord and tenant typically pay their agent a fee of 10% of a full years rent plus VAT at
21%.
Lease Renewal: The tenant typically pays 10% of a years rent. For a rent review, the tenant typically pays 5% of a
years rent plus VAT @ 21%.
Sublease: 5% of total lease value plus 21% VAT.
Ireland
Legal Fees: The tenant pays its solicitor a fee, typically 810% of the frst years rent plus 21% VAT. The landlord
typically pays its solicitor a fee of 10% of the frst years rent plus 21% VAT to create a lease.
Stamp Duty: An additional charge of 1% of the annual rent is charged on tenants.
General
The party that drafts the lease, typically the landlord, prepares a non-binding document called a Heads of Terms,
comparable to a Letter of Intent or Term Sheet in the U.S., which outlines basic terms of the lease.
For new buildings, the landlord and the tenant normally execute two documents: an Agreement for Lease and a Lease.
The Agreement for Lease is in effect until the tenant occupies the space. Upon possession, the Lease supersedes the
Agreement for Lease.
Although no standard lease contract exists, most are relatively similar because much of the law is codifed. Lease
contracts are typically 3060 pages in length.
Right to Sublet
Under the law, a landlord cannot unreasonably withhold consent to a sublet or an assignment.
Option to Expand
A right of frst refusal is negotiable and becoming more common.
Normally, a penalty is imposed to cover late delivery costs and damages. The penalty may be a multiple of rent or a
fxed amount. For a new building, terms of such a penalty are in an Agreement for Lease. For an existing building,
penalty terms may or may not be in the lease.
Holdover by Tenant
Holdover is rarely an issue. The law permits tenants to stay after having been a tenant for fve years or longer.
Transparency
Market data, such as lease lengths, areas, and rents for recent transactions is generally not available to the public.
However, agents normally have access to details of specifc transactions for rent review and research purposes.
In the defnitions below, generation refers to the buildings specifcation (i.e., design standards). A third-generation
building has the latest design standards.
Prime: Best space available, usually brand new, as well as best secondhand space in good locations with third-
generation specifcation and quality design.
Prime Third Generation: Modern, new offce buildings, with full air conditioning and high specifcation, in prime
location in capital or in prime suburb.
Prime Second Generation: Offce buildings built between 19801995 in prime capital or suburban location.
Secondary: Good quality secondhand space; no longer prime due to age or location.
Secondary Third Generation: Modern, new offce buildings with full air conditioning and high specifcation in
secondary locations in suburbs or in capital.
Secondary Second Generation: Offce buildings built between 19801995 in secondary locations in suburbs or
in capital.
Georgian: Older period buildings in the city center. Many are diffcult to convert to modern offces. These build-
ings tend to be in vogue among professional companies such as solicitors and accountants.
Ireland
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CB Richard Ellis, Ireland
Paddy Conlon
Associate Director
+353 1 618 5520
paddy.conlon@cbre.com
About CBRE Ireland: http://www.cbre.ie/ie_en
For Local Market Reports: http://www.cbre.ie/ie_en/research
Ireland
ISRAEL
M.A.N Properties
(Part of the CB Richard Ellis Network)
Tel Aviv
+972 3 561 6161
GAZA STRIP
WEST BANK
EGYPT
SAUDI
ARABIA
JORDAN
SYRIA
LEBANON
ISRAEL
Tel-Aviv
LEASE LENGTH
Term
Leases in new buildings tend to be longer than leases in previously occupied space. A typical lease in a new building
is fve years with an option for fve more years (5+5) or for ten years with a break option after 57 years. A typical
lease in previously occupied space is for three years with an option for three more years.
Break
A tenants break option is negotiable in the contract. Sometimes it provides for a penalty, sometimes a graduated
penalty, depending on when the tenant exercises the option. The landlord usually reserves the right to break on
certain conditions, including: a substantial breach of the lease by the tenant, change of ownership of the tenant,
change in nature of the tenants business or the tenants liquidation.
Renewal
Virtually all contracts include renewal options, which are negotiable. Generally, a lease will not permit the cumulative
term of the lease, including renewal and option periods, to exceed 25 years, in order to prevent the lease from being
deemed a taxable real estate transaction.
SPACE MEASUREMENT
Defnitions
Gross Area: Space measurement for leasing is in gross square meters. Measurements are from external wall to
external wall. Common areas on each foor and common areas on ground foors are allocated to space that is
leased.
Net Area: The net area is area taken from internal wall to internal wall, and excludes the lobby and common
areas on each foor such as toilets, elevators, shafts, etc. Net area has the same meaning as net usable and
carpetable in the U.S.
Effciency
A typical ratio of net area to gross area in a Class A building is 7080%.
AFFILIATE OFFICE
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OCCUPANCY COSTS
Rent
Rent Quoted: Since 2008, rent is generally quoted and paid as net rent in New Israeli Shekels (NIS) per square
meter per month. Rent is rarely quoted or paid in USD/sqm/month as was more common in the past.
Rent Payable: as agreed in the contract. The tenant writes separate checks for rent and service charges quarterly.
Occasionally, when rent is quoted in USD, it is payable quarterly in (NIS) at the representative rate of exchange
with USD, using the higher of rent calculated either as of the date of signing the contract, or calculated at the
time payments are made. The representative rate of exchange is an offcial rate published daily by Bank of
Israel.
Rent Payable in Advance: Three to six months is typical. At the very least, the tenant pays the frst quarterly
payment in advance.
Free Rent: Free rent is negotiable, and normally covers only the period needed for tenant ft-out construction,
which is normally 34 months. Sometimes a tenant can negotiate an additional free month, but rarely more.
Rent Escalation: Rent is normally indexed with the Israeli CPI. Indexing is occasionally U.S. CPI for foreign
companies paying in USD, or linked to USD. Also in option periods, the tenant pays either a fxed percentage of
escalation or market rent, not less than the last payment.
Rent Review: Rent review is performed as negotiated, generally at execution of options.
The tenant pays VAT on rent. The 2010 VAT rate is 16%.
Service Charge
The service charge typically covers repair and maintenance of shared spaces and electrical and mechanical systems,
air conditioning, cleaning, gardening, building insurance, 24-hour security, concierge, and all costs associated with
all public areas and parking areas. A company separate from the landlord usually handles maintenance. Tenants
have the right to check a landlords actual costs at the end of the year.
Service charge = Landlords actual cost + markup + VAT
The landlord determines the amount of markup, which generally ranges from 1015%.
A typical service charge is NIS 1318/sqm/month for a Class A offce building anywhere in Israel.
Taxes
The tenant pays monthly municipal taxes on a close to net square meter basis. The taxes are based on an area
of space recorded by the Land Registry, which is usually close to, but not necessarily identical to, actual net area.
Municipal taxes vary depending on city, neighborhood and use. Large cities generally have higher tax rates than small
cities. The highest tax rates are in Tel Aviv and Jerusalem. Banks and insurance companies pay a higher tax rate than
hi-tech companies.
Monthly taxes for offce space in cities generally range from NIS 922/sqm, and up to four times these amounts for
banks and insurance companies. Monthly taxes for hi-tech space in outlying industrial parks can be as low as NIS
4.511/sqm.
Fit-Out
Fit-out costs for Class A or Prime buildings in major cities normally range from NIS 15002000/sqm, and can include
furniture, design fees, project management, etc. The developer fnishes space according to the tenants specifcations
based on a negotiable construction budget of NIS 12001500/sqm, which includes the cost of air conditioning, wall-
to-wall carpeting, acoustic ceiling, lighting, internal partitioning, and IT wiring (but not furniture, design, engineering
or project management). The tenant pays back the construction cost over a period of 710 years.
When a landlord or developer builds a space for a tenant, the landlord or developer is effectively making a loan to
the tenant. Every NIS 100 provided by the developer is returned with an additional NIS 1.2 per sqm per month on
base rent, over a period of 710 years. The NIS 1.20 per sqm per month is not negotiable, but the length of time for
the loan to be repaid, which can be from 710 years, is negotiable. If the length of a lease is shorter than the payback
period, and if a tenant does not exercise their option to remain, a penalty clause requires the tenant to pay back the
unpaid portion of the investment at the time of lease expiration.
Israel
Restoration
Normally, tenants must return the premises at lease termination in good order, with reasonable wear and tear.
Occasionally, the landlord retains the right to decide whether a tenant must restore the space, although rarely to core
and shell condition, or return it without restoration.
The tenant usually provides a bank guarantee, generally of 46 months rent plus service charge. The landlord
may also require, in additon to rent payable in advance, one or more of the following: personal guarantee, security
checks, and deposits.
Interior repairs.
Insurance for the Leased Premises: third-party insurance, property and contents insurance.
Car Parking: Parking spaces typically lease for USD 320720/space/month plus VAT if on-site. Parking spaces
are commonly allocated at one space per 3040 sqm of offce space. Tenants sometimes negotiate rent-free
spaces if the landlord owns and operates the garage. Some tenants arrange for lower-cost off-site parking.
TRANSACTION COSTS
Agency Fees
New Lease: This varies from 8.310% depending on representation. If only the tenant is represented, 10%
applies. In Israel, many brokers represent both parties, and take 8.3% from each party. CBRE affliates typically
represent tenants only, and charge 10% to the tenant.
Lease Renewal: 10% + VAT of savings unless rent has increased and then a different mechanism is stipulated.
Sublease: One months rent plus VAT paid by both sublessor and subtenant.
Disposal: The term disposal, in Israel, refers to a buyout, in which the tenant pays the landlord to be released
from obligations of the lease. For representing a tenant on a disposal, brokers typically receive a percentage of
savings, typically 10% plus VAT.
Legal Fees
Each party pays its own lawyer, normally by the hour.
No other signifcant transaction costs such as stamp duty or registration fees apply.
General
Parties are free to determine the terms of the lease, without additional statutory rights.
Each landlord uses its own lease document.
Right to Sublet
Subleasing is common. The landlord always reserves the right to approve a subtenant. Normally landlords may not
withhold consent arbitrarily.
Option to Expand
Negotiable. A right of frst refusal is rare but negotiable, and addressed in the lease if given.
Consequences of late delivery are negotiable and normally addressed in the lease.
Holdover by Tenant
Tenants do not have a right to hold over. Leases provide for a big penalty if the tenant holds over, typically between
150% and 200% of lease rent per day. Additionally, the landlord can go to court and claim damages.
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Signage and naming of buildings are negotiable, and can be addressed in the lease.
Transparency
Data on comparable transactions is generally available for recent transactions including tenants, square meters and
rents; however, published rents may be inaccurate, because landlords and tenants sometimes report misleading
information. Parties may seek to achieve confdentiality with a non-disclosure clause in the lease. The local press often
prints terms of deals.
No common building classifcation system exists in Israel, although it is safe to say that Grade A buildings are much
better than Grade B, and that Grade C buildings are rare.
M.A.N Properties (Part of the CB Richard Ellis Network), Israel
Smadar Michalelov
Head of Global Corporate Services
+972 3 561 6161
smadar@man.co.il
About CBRE Israel: http://www.cbre.com/international/sites/israel/default
Israel
ITALY
Milan
CB Richard Ellis SpA
CB Richard Ellis Espansione
Commerciale Srl
+ 39 02 303 777 1
Milan
CB Richard Ellis Professional
Services SpA
+ 39 02 65 56 70 1

Rome
CB Richard Ellis SpA
Services SpA
+39 06 4523 8501
Turin
Services SpA
+39 011 227 2901
Modena
CB Richard Ellis Espansione
Commerciale Srl
+39 05 929 248 11
FRANCE
SWITZERLAND
LIECH.
AUSTRIA
SLOVENIA
CROATIA
ITALY
HUNGARY
SERBIA
BOSNIA AND
HERZEGOVINA
MONTENEGRO
CROATIA
MONACO
MALTA
Turin
Milan
Rome
Modena
LEASE LENGTH
Term
Commercial leases are usually 6+6 years; i.e., for six years with a right to renew or break after six years. Leases can
be for a longer period (i.e., ten years).
Leases are generally for 6+6 years with 12 months prior notice for the tenant.
Renewal
The tenant has an automatic right either to terminate, with 12 months notice, or renew after the frst lease term.
Break
Break by Tenant: Parties might negotiate in advance to include a break clause that allows the tenant to break the
lease before the frst six-year term ends. In the last few years, many companies have put a break option after the
third or fourth year as well. The break clause typically provides that if no party gives notice, the lease automati-
cally renews for another six years upon the frst expiration.
Break by Landlord: A landlord can break after the frst six years, only under certain well-defned circumstances,
such as occupation by the landlord or demolition.
SPACE MEASUREMENT
Gross Internal Area
Although no standard measurement codes exist, measurements for leasing and sales are normally on a gross internal
basis, measured from the inside of external walls, and include usable space, stairs, structures and lifts, and some or
all common areas. Some prestigious CBD buildings measurements include common or ancillary spaces that would
not be included in buildings in peripheral areas.
Effciency
A typical ratio of carpetable area (i.e., area usable exclusively by the tenant) to gross internal area for a Grade A
offce building is 8085%.
CBRE OFFICES
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OCCUPANCY COSTS
Rent
For current Rental Rates please visit CBREs Global Knowledge Center: http://gkc3.cbre.com/search/search.aspx
Rent Quoted: EUR/sqm/year, excluding service charges and VAT
Rent Payable: Rent is usually payable quarterly in advance.
Free Rent: In late 2010, tenants could obtain 612 months free rent. Incentives, such as free rent, are generally
greater for longer lease contracts.
Rent Escalation: For a six-year contract, rent usually adjusts annually by up to 75% of the infation index, ISTAT
(LIstituto nazionale di statistica) as prescribed in relevant legislation. For leases longer than six years, starting in
2009, rent can adjust by up to 100% of the infation index.
Service Charges
For a single-tenant property, the tenant generally pays directly for each service charge. For a multi-tenant building,
the tenant pays proportionally by occupied area, according to the lease contract. Service charges can include:
Ordinary maintenance: management and cleaning of the common area (including landscaping and parking).
Property management fee.
Air conditioning and heating for the common area.
Utilities for common areas: electricity and telephone.
Water consumption including tenants personal usage is normally part of the service charges.
Satellite aerial / CCTV.
Reception and building security.
Service charges can range from EUR 2550/sqm/year depending on the location, building quality and level of
services offered. For city center buildings in Milan, service charges are typically around EUR 4550/sqm/year.
Taxes
Value Added Tax (VAT): The standard rate paid on rent, furniture, tenant construction, etc., is 20%. The entity
that incurs the cost of the item pays the VAT. Therefore, the tenant pays VAT on rent. If a landlord pays ft-out
costs such as furniture or tenant construction, etc. the landlord pays VAT on these items. Service charges are also
subject to VAT, payable by the tenant.
Garbage Tax: The tenant pays its proportional share to the municipality based on the area it occupies.
Registration Tax: Paid annually and equal to 1% of the rent. Half is paid by the landlord, and half by the tenant.
Utilities
Electricity: Tenants pay for their personal electricity usage based on a meter. The cost of electricity used in
common areas is included in the common area service charges.
Telephone: Tenants pay for their personal telephone usage.
Water: The tenant pays for water usage based on a meter when not included in the service charges.
Fit-Out Costs
Landlord Work: The landlord provides permanent (demising) walls, restrooms, suspended ceilings and raised
foors.
Tenant Work: The tenant traditionally provides ceiling lighting, interior partitions, cabling, telephone system, etc.,
typically using the tenants own architects, engineers, and contractors.
Fit-out Costs: For Class A or Prime buildings in major cities, ft-out costs normally range from EUR 6001,200
per sqm including construction, furniture, wiring, design fees, etc. However, in 2007, landlords began to contrib-
ute, and starting in 2010, some landlords are building customized spaces for tenants.
Italy
Restoration
The law requires the tenant to restore the premises at the end of the term, unless otherwise agreed in the lease
contract.
Three to six months rent, in the form of a bank deposit in most cases, or a cash deposit, is the minimum and standard
security deposit.
The landlord can claim part or all of this deposit directly from the bank in the event of non-payment of rent.
Generally, landlords keep the deposit in the bank and do not use it for other purposes. The deposit can be greater
for risky companies.
There are no other signifcant occupancy costs.
TRANSACTION COSTS
Agency Fees
Agents that work on an exclusive basis are paid by their client. Agents that work on a non-exclusive basis sometimes
negotiate a full fee from both parties. Large real estate companies, like CBRE, normally work on an exclusive basis.
New Lease: The tenant typically pays its agent 1015% of one years standard base rent (calculated without
deducting any free rent) plus 20% VAT. For this fee, the agent conducts a property search and negotiates the
lease contract on behalf of the client. Landlords generally hire agents to market the property with a similar fee
structure.
Lease Renewal: The fee, plus 20% VAT, can be based on the transaction structure, a fxed fee, or a percentage of
savings.
Sublease: The agents client pays 1015% of the frst years rent plus 20% VAT.
Registration Tax: Equal to 1% of the rent paid half by the landlord and half by the tenant and is paid annually.
Legal costs are typically minimal.
General
The Italian Civil Code rules and therefore leases are shorter than in the U.S. and the U.K. Most disputes are solved pri-
vately by negotiations between the landlord and the tenant because the legal process is normally very time-consuming.
Standard Lease Document
It is not market practice to use a standard lease document. It is market practice to negotiate the lease terms in each
transaction.
Right to Sublet
Subletting is normally allowed with consent of the landlord.
Option to Expand
An expansion option is not typical.
Contracts rarely address late delivery, except that agreements for new buildings often have penalty clauses. Most
existing spaces are marketed after they become vacant.
Holdover by Tenant
Holdover is not normally covered in the lease contract, although the landlord can keep the deposit, and can claim
damages if the lease provides for damages.
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Tight planning regulations limit signage, which is determined on a case-by-case basis. Every sign outside a building
needs municipal authorization, which normally includes a nominal charge. The landlord must also agree to signage
and naming.
Transparency
Milan is the economic center of Italy, with mostly institutional ownerships and the greatest number of large transac-
tions in Italy. Milan has Italys most transparent offce market, although less transparent than the London market.
Comparables, including tenant names, square meters and reported rental levels, are generally available only for
signifcant recent transactions.
The Rome market, with mostly private ownership and a greater concentration of public buildings, is less transparent
than the Milan market.
Other cities have localized markets where it is more diffcult to obtain good market data. Large real estate companies
like CBRE work with local brokers in smaller markets to obtain the information required.
No formal classifcation system exists. However, buildings are classifed informally (Grade A, Grade B, etc.) based on
building age, building quality, location and accessibility.
CB Richard Ellis, Italy
Raffaella Pinto
Head of Research
raffaella.pinto@cbre.com
+39 02 303 777 71
About CBRE Italy: http://www.cbre.it/it_en
Italy
UZBEKISTAN
KYRGYZSTAN
CHINA
KAZAKHSTAN
MONGOLIA
TURKMENISTAN
RUSSIA
Almaty
Astana
Atrau
Aktau
LEASE LENGTH
Term
Due to the impact of the world fnancial crisis, average lease terms decreased from 57 years in 20062007 to three
years in 2010 for Class A buildings. Leases for Class B space are generally shorter. One-year lease agreements with
further prolongation became more common in 20082010.
Break
In most leases for Class A and Class B buildings, the break option is negotiable. Break options usually follow
Kazakhstan legislation, including Clause 556 of the Civil Code.
Break by Landlord: Clause 556 permits a landlord to break if the tenant (1) uses the space for purposes that
violate terms of the lease agreement, or (2) damages the premises, or (3) misses two or more monthly rent
payments, or (4) fails to make capital improvements as agreed.
Break by Tenant
- Clause 556 permits the tenant to break if (1) the landlord fails to deliver the premises to the tenant or causes
obstacles to its use as specifed in the agreement, or (2) the landlord fails to perform capital repairs as agreed,
or if the premises have defects that were not disclosed, or (3) if the premises become unusable from causes
other than the tenants actions.
- Additionally, most foreign tenants try to include tenant-only break options with 13 months notice.
Renewal
The Kazakhstan Civil Code gives current tenants that have fulflled terms of the agreement a priority right (a right
of frst refusal) to renew the lease agreement for the new period, with mostly the same terms and conditions except
commercial terms, such as rent payment, service charge, etc.
SPACE MEASUREMENT
Gross Area
Professional landlords of new class A developments charge for gross offce area, based on the BOMA method for
gross offce area measurement.
KAZAKHSTAN
Almaty
+7 7272581760
Scot Holland in association
with CB Richard Ellis
Astana
+7 7172990440
Atyrau
+ 7 7122354346
Aktau
+ 7 7292200917
CBRE OFFICES
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Landlords of Class B business centers use the local system of measurement, Bureau of Technical Inventory (BTI).
Tenants are to pay rent for the gross area, which includes common use areas, toilets and fre stairs, etc. Landlords
rarely charge the rent based on the usable area.
OCCUPANCY COSTS
Rent
Base Rent: The U.S. dollar has been the traditional currency for rental rate measurement since 2001. In ac-
cordance with Kazakhstan legislation, the tenant must pay the rent in Kazakhstan tenge (KZT) if both parties are
domestic. Foreign tenants are permitted to pay rent in USD or EUR.
Rent Payable: Tenants typically pay rent and operating expenses quarterly in advance. Monthly payment is very
rare. Rarely, tenants prepay semi-annually or nine months in advance.
Rent Free: The rent free period usually cover, the ft-out period. If the landlord delivers the premises in a shell-
and-core condition, free rent is typically two to four months. If the landlord delivers the premises in a ftted-out
condition, which a tenant may re-confgure, free rent is typically one to three months.
Rent Escalation: Rent can be adjusted based on any of the following methods:
- fxed during the lease term, or
- adjusted using the USD/KZT currency exchange rate on the date of signing the lease agreement, or
- indexed based on the infation rate determined by the National Bank of Republic of Kazakhstan, or
- increased by a fxed percentage (usually 310%) from the second or third year of the lease.
Operating Expenses
Operating expenses for Class A premises average USD 6084/sqm/year, net of VAT. Operating expenses for Class B
premises average USD 3660/sqm/year, net of VAT.
Typically, operating expenses cover:
Property management fees.
Utilities except electricity.
Security: Usually guards in the main lobby, outside of the Building and parking area; a card access system, and
reception issuing cards and checking passports.
Maintenance and cleaning of common areas. Some Business Centers include cleaning inside the premises.
Trash removal.
Property taxes.
Building Insurance: The landlord pays for building insurance and usually passes its cost on to tenants as a part
of the operating expenses.
Taxes
VAT: 12% VAT is payable on the monthly rental and service charge.
Utilities
Tenants pay for electricity by meter.
Tenants pay for water if tenant has a separate kitchen.
Tenants pay for telephone and internet. Tenants contract for telecommunication services on foors.
Extra Air Conditioning: Only few landlords provide air conditioning during normal offce hours (Monday to
Friday, 9 AM to 7 PM). Most landlords provide tenants with 24/7 air conditioning. The tenant pays for any
additional air conditioning to their server room, based on usage measured by a meter.
Telephone Lines: If the premises in a shell-and-core condition, the landlords generally provides a building
telephone station and cabling to foors. If the premises are in a ftted-out condition, the landlord provides
tenants with telephone lines and Internet connections. The tenant pays for additional telecom lines and Internet
connections if needed later.
Kazakhstan
Fit-out
Landlord Work: Handover condition for new international standard buildings is generally shell and core, typically
with fnished common areas, fully functional restrooms, heat distribution throughout, elevators, base building
mechanical systems and an operational fre safety system. Restrooms are not typically inside the tenants prem-
ises. Any restrooms inside their premises are considered tenant work. From 20082010 most international and
domestic tenants had limited budgets, and therefore most leases were for ftted-out offce space, not shell-and-
core offce space.
Tenant Work: Landlords sometimes recommend their contractors to the tenants. In most cases tenants use their
contractors, engineers, designers, etc. Some foreign companies organize tenders to choose the best contrac-
tor. A Tender Process (or Invitation to Tender process) is a method to select suppliers to provide products and
services. The process involves creating a suite of Tender Documents to manage the supplier selection process.
The Tender Documents help the organization to select the best possible supplier available, and include docu-
ments such as the Statement of Work, Request for Information and Request for Proposal. Usually a tender
process takes 12 months.
Most tenants hire a project manager for quality and cost control, or to oversee non-standard work, or for
special technical systems such as the computer server room.
Tenant Work Cost: The standard ft-out cost is worth about USD 700900/sqm. International companies usually
spend USD 400700 /sqm beyond standard ft-out cost. These costs include construction, furniture, wiring,
design fee, etc.
Restoration
Restoration is not usually required. Only few landlords require tenants to re-paint the walls, change the fooring,
ceiling, etc.
Parties normally agree to a security deposit of one to three months. The landlord returns it to the tenant after the lease
expiration if the premises is undamaged and all rent has been paid. Otherwise, the landlord uses it to cover the rent
payment for the last months.
Repairs: The tenant pays for repairs and improvements inside offce premises. The landlord is responsible for
building repairs and repairs to the parking areas and other adjacent areas.
Insurance: The tenant pays to insure his premises and property inside it.
Additional Security on Floors: Some tenants provide their own additional security.
Car Parking: Landlords normally allocate one space per 100 sqm of leased area. Parking costs are typically:
- For underground parking in BC Class A buildings: USD 300500 per place per month excluding VAT.
- For above-ground parking in BC Class B buildings: USD 100200 per place per month excluding VAT. Few
Class B buildings, which are reconstructed Soviet-era buildings, have underground parking.
TRANSACTION COSTS
Tenants often use outside agents or advisors to represent them in transactions. Landlords are normally represented
by their employees, who may be lawyers. It is rare for outside agents to represent landlords.
Agency Fees
New Lease: Typically, either the landlord or tenant, or both, pays the tenants agent a fee of 8.3315% of the
annual rent, depending on the size and scope of services provided. VAT at 12% is additional.
Lease Renewal: 57% of the annual rent. VAT at 12% is additional.
Legal Fees: Each BC in Kazakhstan has its own lease agreement. Some foreign companies hire law frms to as-
sist them in lease agreement negotiations. Legal fees are generally USD or EUR 100350 per hour, depending
on the position of the advisor (partner or legal adviser). Many domestic companies use in-house lawyers.
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Lease Registration Costs: According to Kazakhstan legislation, the lease agreement must be registered within
six months after the lease agreement is signed. Landlords usually register the leases, and tenants provide them
with necessary documents and assistance. Tenants rarely do the registration. Registration generally costs USD
50100 maximum.
General
Letter of Intent: New or foreign companies that enter Kazakhstan markets typically need a month or more to get
necessary approvals, so parties usually sign a non-binding letter of intent in which the landlord agrees not to
show the space to others within an agreed period of time.
Binding Preliminary Agreement: If the building is new and the landlord has not yet received title documents from
the state, the tenant and landlord sign a binding preliminary agreement. Before the fnancial crisis, there were
many transactions for Class A space in new buildings, where the landlord expected to have title within several
months after state commissioning. In these cases, tenants could occupy the space with a preliminary agreement,
which later became a part of the full lease agreement.
Lease Agreement: Once the landlord receives title documents, parties sign the lease agreement.
Act of Acceptance of the Premise: After parties sign the lease agreement, parties must sign the Act of Acceptance
of the Premise specifying its condition and defects.
Standard Lease
Each Business Center has its own lease agreement, which contains the most important points of the lease (commercial
part, lease expansion, break option, lease renewal, parties responsibility, confdentiality, etc). In accordance with the
legislation the lease agreement should be made on the Kazakhstan national language and if needed translated to
other languages.
If the lease agreement is signed for the period of one year or more, it must be registered with the state authorities.
Right to Sublet
Subletting is a standard right of the tenant, subject to the landlords reasonable approval. Parties usually include
this right in the lease agreement; however, the right to sublet is written in the law. Tenants can sublease part of their
premises to affliated companies without the landlords approval. During the 20082010 fnancial crisis, many ten-
ants decided to sublease part of their premises.
Option to Expand
This is achievable for tenants. In 2010 some tenants started to expand and lease more offce space. Very few
expanded in 2008 and 2009.
This is achievable for anchor tenants.
The penalty is one day rent-free for each day of delay or 0.10.5% of the monthly rent for each day of delay, depen-
dent upon the Parties Agreement.
Holdover by Tenant
Tenants normally pay a penalty of 0.10.5% of the monthly rent for each day of delay, as specifed in the lease
agreement. This is very important for landlords, who want the tenant to vacate on time so that the space can be ready
for a new tenant. Most lease agreements allow the landlord to show the leased space to potential new tenants one to
two months before lease expiration.
Tenants normally are permitted to install the signage in the main building lobby. Large and anchor tenants can
negotiate with the landlord to install external signage on the building faade or on the roof, or fagpoles on the
property. Exterior signage and fagpoles cost extra.
A major tenant occasionally gets naming rights.
Kazakhstan
OFFICE LEASING MARKET
General
Business Centers (BC): A business center in Kazakhstan is a professionally managed offce building that provides a
variety of amenities and services. Business centers generally have underground parking, space for archives, technical
rooms, and a canteen. Business centers may provide the following:
- Legal address: When a new company opens an offce in Kazakhstan, it needs a legal address to register
its representative offce or branch. In such cases, tenants use the address of the BC, so they can start the
registration.
- Conference rooms that tenants can rent.
- Virtual offce services, including receiving all incoming calls and faxes, mail forwarding.
- A postal address to receive correspondence.
Business centers may have one or more tenants. Some large companies occupy entire business centers. Foreign com-
panies occupy more than half the business centers in Kazakhstan. Business centers tend to be around 15,00020,000
square meters in size, because seismic conditions often limit building size to about 15,000 square meters.
Transparency
Information on rentals and occupied area in Almaty and elsewhere in the country is largely secret. Most business
center owners do not disclose such information to third parties.
The classifcation system in major cities of Kazakhstan is only starting to form and is not yet generally accepted; thus
many recently built business centers do not correspond to the class claimed by their developer. Despite the lack of
a single generally accepted system, most Commonwealth of Independent States (CIS) countries (i.e., former Soviet
republics), including Kazakhstan, use the classifcation below:
Class A+: These are the best Class A buildings.
Class A: The defnition of Class A properties varies from market to market. Class A properties generally are
international-grade investment properties with the following: a complete new build; fully controllable 4-pipe
HVAC system; raised foors and suspended ceilings; slab-to-slab height of 3.6 meters or better (no less than 2.7
meters from the top of fnished foor and to the suspended ceilings); effcient column spacing (no less than 7
meters) with rationale window spacing; suffcient underground parking; an advanced building management and
security system; excellent utility capacity; UPS; modern high-speed lifts with maximum waiting time of about 30
seconds; international-standard property management; a professional, experienced landlord; and, proper legal
documentation.
Class A: Complete new-build or reconstruction; fully controllable HVAC system; advanced building manage-
ment and security system; suffcient utility capacity; UPS; possibility to install raised foors; modern high-speed
lifts of suffcient capacity; international standard property management; a professional, experienced landlord;
and proper legal documentation. May lack underground parking. Similar to Class A but missing one or more of
the requirements for Class A.
Class B+: Close to Class A buildings: either newly built or fully reconstructed in early 1990s; less effcient foor
plates and design, (including capital walls, etc.); often with 2-pipe HVAC or comfort cooling; may have a less
experienced landlord and/or property manager. Similar to Class A but missing one or more of the require-
ments for Class A.
Class B: Located in or near the central business district, with decent design and management. Some are former
Class A properties, downgraded over time, but still with good services and amenities. They generally have
substantial reconstruction or refurbishment; split-system AC; capacity to install suspended ceilings; western
cosmetic fnishes; 24-hour security; local property management; some level of building amenities and services;
an experienced landlord, and adequate surface parking.
Class B: Cosmetic renovation of Class C-level building; typically ineffcient corridor system layout; forced air
ventilation; minimum level of property management; poor building amenities and services; may lack proper
legal documentation.
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Class C: These are generally old, unreconstructed Soviet-era buildings with poor location and very limited
services and amenities. Many are occupied by small local companies or public institutions.
Class D: Derelict buildings requiring signifcant structural work or total reconstruction.
CB Richard Ellis, Kazakhstan
Sholpan Makatova
Offce Agency Manager
+7 701768 57 79
sholpan.makatova@cbre.kz
Peter Goranov
Strategic Consulting and Evaluation Manager
+7 7015705643
peter.goranov@cbre.kz
About CBRE Kazakhstan: http://www.cbre.kz
Kazakhstan
LEASE LENGTH
A standard lease contract in Luxembourg is for nine years with a break option generally fxed every three years. The
break option can be exercised by the landlord, the tenant or both. This is called a 3/6/9 year lease. Parties are free
to vary lease lengths, breaks or other terms. Lease contracts must be in writing. Tenants have no renewal rights except
as agreed in the contract.
SPACE MEASUREMENT
Gross Lettable Offce Area
Rentals are based on the gross lettable area, which measures from the internal face of external windows and the
mid-point of the party wall of the adjoining building. The gross lettable area includes usable offce area, elevators,
stairwells, bathrooms and common areas. The ground foor entrance and entrance halls are included in the gross
lettable area and are allocated in multi-let buildings to all foors.
Effciency
A typical ratio of carpetable area to gross lettable area in a Class A building in Luxembourg City is about 80%. The
term carpetable area refers to the area available for offces.
OCCUPANCY COSTS
Rent
Rent Payable: Rentals are normally payable quarterly in advance in EUR/sqm/month.
Free Rent: Depending on the market situation, landlords use rent-free periods and other incentives, such as
ft-out costs allowances to close lease contracts with longer durations.
Rent Escalation: Rent is annually indexed according to the Indice Statec C2 (moyenne semestrielle des indices
raccords la base de 1.1.1948). Rent can rise or fall unless the contract stipulates otherwise.
Costs Included in the Rent: The landlord pays for structural repairs only, not for non-structural repairs within or
outside of the tenants area.
LUXEMBOURG
GERMANY
FRANCE
BELGIUM
Luxembourg
LUXEMBOURG
Luxembourg City
+352 26 26 12
CBRE OFFICE
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Common Service Charges
In addition to rent, the tenant pays its proportion of common (i.e., shared) service charges for the property. Average
common service charges for a Class A multi-tenanted building in Luxembourg are EUR 4/sqm/month. Common
Service Charges include:
Maintenance of the building and grounds and building employees.
Repairs: This includes all building repairs except for structural repairs, which the landlord pays.
Property Tax: The building owner pays the property tax, called impt foncier, and recovers it from the tenant
as part of the service charges. The impt foncier is a municipal tax computed on its valeur unitaire, which is
the building value, defned by the valuation department of the tax administration of Luxembourg based on the
buildings use, location, and type.
Heating, cooling, water, and common electricity.
Taxes
Value Added Tax (VAT): Rent payment and service charges are subject to VAT of 15%. The tenant can recover the
VAT if it is liable for VAT.
Occupation Tax: No occupation taxes apply.
Property Tax: As discussed above, the building owner pays the property tax, called impt foncier, and recovers it
from the tenant as part of the service charges.
Utilities
Tenants pay the electric company for electricity used within the premises based on a meter. Its cost is typically about
EUR 7.1/sqm/year.
Tenants pay for cleaning within their premises.
Tenants pay for heating, cooling, water, and common electricity through the global common service charges, calcu-
lated based on the area occupied.
Fit-Out
Landlord Work: The landlord normally delivers the space with heating, cooling, ventilation, mechanical and
electric service, suspended ceilings, ceiling lighting, carpet, restrooms and fre detection.
Tenant Work: Partitioning, wiring and upgrading are tenant-paid and require the landlords approval.
Fit-out costs for Class A or Prime buildings in major cities normally range from EUR 250500 per square meter,
including construction, wiring, design fees, project management, etc. Furniture is additional, and depends on the
tenants choice of furniture.
Restoration
At the end of the contract, the tenant must return the premises to its original state if stipulated in the lease.
For all companies, the landlord normally requires a bank guarantee of 6 months rent (plus VAT) plus service charges
(plus VAT), based on the landlords evaluation of the tenants credit.
Car Parking
Parking spaces throughout Luxembourg rent separately from the offce area. CBD parking costs range from 350450
EUR per space per month, VAT excluded. In other districts, rents are lower. Parking spaces are allocated proportionally
according to the amount of space the tenant occupies within the building according to the ratio defned for the district
by the state of Luxembourg. The law requires that landlords provide parking spaces according to the ratio.
Repairs within the tenants premises.
No other signifcant costs generally apply.
Luxembourg
TRANSACTION COSTS
Agency Fees
Leases and Subleases: When the agent acts on behalf of the landlord, the landlord pays agency fees of 15%
of the annual rent. When an agent acts on behalf of the tenant, the tenant pays fees amounting to 15% of the
annual rent.
Lease Termination: Typical fees for an agent acting on behalf of the tenant are around 8% of the annual rent.
The tenant pays legal fees to the tenants lawyer to review and negotiate the legal points in the lease.
Registration fees: For tenants that are not subject to VAT, these fees amount to a number of 0.6% of all rents until
the frst break. For tenants subject to VAT, these fees total approximately EUR 20.
General
Real estate practices in Luxembourg are similar to practices in Brussels.
Luxembourg law governs offce leases in the event of a dispute not covered in the lease.
Right to Sublet
Subleasing is legal and common in Luxembourg. The lease contract may require landlord permission.
Option to Expand
A right of frst refusal is negotiable.
Penalties for late delivery by the landlord are negotiable and addressed in the lease contract.
Holdover by Tenant
Leases rarely address holdover by tenant, i.e., penalties when the tenant remains in the premises after lease expiration.
The lease normally addresses signage. Normally the landlord allows tenant signage on a building. The placement
and size have to be as agreed. However, the tenant has to comply with building rules and eventual administrative
directives issued by the communes or the state of Luxembourg.
Large tenants with long leases can sometimes negotiate the name of a building.
Transparency
The market is quite transparent. Comparables that identify tenants, square meters and rents are available, although
incentives are not always disclosed.
No classifcation guidelines exist in Luxembourg, except that buildings are classifed as either new or second-hand.
PURCHASE AND SALES
A few companies own areas in condominium buildings. Buildings in Luxembourg are often multi-tenanted premises,
but rarely multi-owner premises. A condominium makes the sale of a property much more diffcult. Institutional
investors are normally not interested in such premises.
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Transaction Costs
Agency Fees: The seller normally pays its agent and the buyer normally pays its agent. Each agent receives fees
of 13%.
VAT: If the construction was complete in the year of purchase or will be completed in the future, the buyer pays
VAT, which is 15% of the purchase price.
Property Transfer Tax: When older buildings are sold as asset deals, the buyer pays only the property transfer
tax, generally 6% to the Administration de lEnregistrement et des Domaines. The taxable basis cannot be lower
than the market value. The transfer tax rises from 6% to 7.2% if the buyer declares that he intends to resell the
property. If the buyer resells within two years, 5% is refunded if the resale occurs. Four percent will be refunded
if the sale occurs between two years and four years. For non-private property in Luxembourg City, a 9% transfer
tax is charged instead of 6%.
Transcription Tax: The buyer pays a transcription tax of 1% of the acquisition price of the property. A transcription
tax pays the commissioner for the change of the owners name in the offcial documents.
The property transfer tax and the transcription tax apply only with asset deals (in which a property is transferred),
not share deals (in which shares that include the property are transferred).
CB Richard Ellis, Luxembourg
Vronique Koch
Marketing & Administration
+352 26 26 12 23
veronique.koch@cbre.com
About CBRE Luxembourg: http://www.cbre.lu
Luxembourg
MAURITANIA
ALGERIA
MOROCCO
WESTERN
SAHARA
Canary
Islands
Madeira
Islands
SPAIN
PORTUGAL
Gibraltar
Casablanca
LEASE LENGTH
Typical Term
The typical Moroccan commercial lease is called bail trois/six/neuf (3/6/9 lease). The 3/6/9 lease gives both parties
the right to break every three years.
Other leases provide for a six- or nine-year commitment, called a frm contract period. Normally, no exits are allowed
during the frm period.
Termination
The lease terminates at the end of the agreed term unless it is renewed.
Renewal
Most leases have automatic renewals at the end of the agreed leasing period. The renewal period is generally for
one to three years.
SPACE MEASUREMENT
Area
Quoted areas are usually on a net basis. The net area includes bathrooms within the premises, but excludes common
building spaces such as stairs, elevators, shafts, and exterior walls.
OCCUPANCY COSTS
Rent
Rental: The tenant pays rental including service charges and taxes in Morocco Dirhams (MAD).
Rent Payable: Tenants often pay rent quarterly, but some tenants negotiate monthly payments.
Free Rent: Some owners agree to a rent-free period, usually 13 months.
Rent Escalation: Rent is subject to a triennial increase, which is 10% in most cases. The law limits rent increases
to 10%, so most landlords apply 10%, some less.
MOROCCO
Casablanca (Head Offce)
+212 522 77 89 80
CBRE OFFICE
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Car Parking: in Casablanca, tenants usually get one car parking space free of charge for every 120 sqm of
Class A space leased.
VAT is only applied to rent (and services) for serviced premises (bureaux garnies), i.e., premises that provide
ft-out works, furniture, telephones and secretarial services, reception, etc.
Building Service Charges
Building Service Charges (charges de gestion de limmeuble) are also called Common Area Maintenance (CAM) or
Tenant Service Charges (T/S). These are the tenants proportional contribution toward building maintenance and
services. Service charges that the landlord pays to the sub-contractors include VAT. This total amount (including sub-
contractors VAT) is re-invoiced to the tenant (without additional VAT).
Landlords are not permitted to charge more than the actual cost of services.
Taxes
The tenant pays 10.5% local (i.e., city) tax to the landlord in addition to the rent. The landlord forwards the tax to the
government.
Utilities
Tenants pay the provider directly for their electricity and water consumption based on a meter.
Fit-Out
Landlord Work: Landlords normally deliver a core and shell. Bathrooms are normally included in the landlords
work. Suspended ceilings, ceiling lighting, air conditioning system, and ductwork are normally tenant work.
Tenants normally pay all ft-out costs, although sometimes landlords do ft-out work and recover the costs in the
rent.
Fit-out costs for Class A (Prime) buildings in major cities normally range from MAD 35005000 per square
meter, including construction, furniture, wiring, etc.
Restoration
Tenants normally must restore the premises when they vacate. However, they may be able to negotiate a notice to exit
without restoration if they leave the premises in good condition.
A typical security deposit is for one to three months rent.
Car Parking
Car parking spaces are normally included in the rent.
Commercial leases in Morocco are standardized, but are not regulated. Standardized means that the lease terms
are standard (i.e., commonly used) but free to be negotiated.
Right to Sublet and Assign
Subletting is rare. The landlord usually allows subletting only to related companies.
Option to Expand
Not typically granted. However, a tenant may negotiate a frst refusal for other space in the building.
Negotiable. A clause in the lease may specify the amount of indemnities. No laws address this.
Holdover by Tenant
The parties usually negotiate a holdover penalty in the lease, typically in the form of a 50100% rent surcharge. When
a lease does not address holdover, a court can set the penalty amount.
Morocco
Owners usually permit signage in common areas. Owners of single occupancy buildings may permit exterior signage
and the right to name a building if local authorities allow it.
TRANSACTION COSTS
Agency Fees
In Morocco, agency fees are as follows:
New Lease Acquisition: The landlord and tenant each pay 15% of the annual rent plus 20% VAT to their agent. If
one agent represents both parties, the agent receives 30% of the annual rent plus 20% VAT.
Sublease: If allowed by the landlord, the sublandlord and subtenant each pay 15% of annual rent plus 20% VAT
to their agent. If one agent represents both parties, the agent receives 30% of the annual rent plus 20% VAT.
Lease Renewal: The tenant pays 7.5% of the annual rent plus 20% VAT.
Purchase and Sale: The buyer and seller each pay 5% of the sales price plus 20% VAT to their agent. If one agent
represents both parties, the agent receives 10% of the sales price plus 20% VAT.
Transparency
Generally, information on rentals in Morocco is not easily accessible.
No formal classifcation system exists in Morocco, although properties are informally classifed as follows:
Grade A: Also called Prime. Properties in prime locations with good facilities such as good mechanical and
electrical installations such as a generator set, lifts (elevators), air conditioning, access control, fre fghting
equipment and services such as security, etc.
Grades B and C: Properties without such facilities and in less attractive locations.
Karim Lahlou
Senior Manager
+212 522 77 89 80
karim.lahlou@cbre.com
Morocco
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NETHERLANDS
Almere
+31 36 545 8000
Amsterdam
+31 20 62 62 691
The Hague
+31 70 750 8900
Hoofddorp
+31 23 565 7700
Rotterdam
+31 10 300 4800
UNITED KINGDOM
SWITZERLAND
SAN MARINO
THE NETHERLANDS
MONACO
LUX.
LIECH.
ITALY
GERMANY
FRANCE
DENMARK
BELGIUM
ANDORRA
Amsterdam
Almere
Hoofddorp
The Hague
Rotterdam
LEASE LENGTH
Lease Term
The length of leases is negotiable and can be of any length, but 5 years is standard. Most leases of fve to ten years
include an option to extend for fve years. Such options apply to properties of all sizes.
Termination
The law does not give offce tenants the right to terminate. The right to terminate is negotiable and can be included
in the lease.
Renewal
The tenant has the right to renew after the option period(s) only if both parties agree.
SPACE MEASUREMENT
Defnitions
Lettable foor area measures from the internal face of external windows. A clear and standard measurement code,
called NEN 2580, provides instructions for measuring lettable area by a certifed person or offce.
Areas Included: Internal walls, restrooms, and primary entrance halls.
Areas Allocated: Shared areas in multi-tenant buildings are allocated proportionally to all foors.
Areas Excluded: Areas for vertical distribution, such as staircases, elevators and shafts.
For most cities in the Netherlands:
Gross foor area = the area of the foor measured to the outside of the exterior walls.
Net foor area = approximately 90% of gross foor area = Gross foor area minus constructions, walls, faades,
shafts, rooms lower than 1.5m.
CBRE OFFICES
Lettable foor area = approximately 84% of gross foor area = Net foor area minus vertical corridors.
Effcient foor area = approximately 63% of gross foor area = Lettable foor area minus horizontal corridors.
Functional foor area = approximately 57% of gross foor area = Effcient foor area minus loss because of
lay-out.
The terms loss factor and carpetable area are rarely used in the Netherlands.
OCCUPANCY COSTS
Defnitions
Base Rent equals rent excluding service charge, and is equivalent to net rent in other countries.
Total Rent equals base rent + service charge + occupier taxes, and is equivalent to gross rent elsewhere.
The terms net and gross have other meanings in the Netherlands, and are used in connection with the
landlord approach to calculating rents.
Rent
Rent Quoted: Rents are quoted as net rentals in EUR/sqm/annum excluding VAT.
Rent Payable: Rent is generally payable quarterly in advance.
Free Rent: A free rent period is very common, but the amount varies greatly on the type of building, location and
length of lease.
Rent Escalation: Indexations take place annually in accordance with the annual CPI, Consumer Price Index,
series for all households (2006=100), published by Statistics Netherlands, and start one year after the lease
commencement date.
Market rent reviews: These are optional, and are negotiable each time they occur, which is generally not before
the end of the frst lease period.
Costs Included in Rent: Building insurance and building repairs.
Service Charges
The tenant pays service charges quarterly, in advance, with annual retrospective settlement. Service charges cover
common electric, heat, cleaning, security, insurance, and management fees. A typical service charge in a Class A
building in Amsterdam is EUR 3555/sqm/year, excluding VAT.
Taxes
Property Tax: The property tax is charged to both the landlord and the tenant. The tenant pays approximately
45%. The landlord pays approximately 55%. The rate differs per municipality and is determined every year. A
typical property tax charge for a tenant in a Class A building in Amsterdam is approximately EUR 46.50/sqm/
year. The tenant pays its portion of the property tax directly to the municipality.
Value Added Tax (VAT): VAT is 19% on services as well as on rent, although some of it may be recoverable.
Utilities
Electricity: Electricity costs are normally included in the service charges, based on the area occupied. If not
included in the service charges, they are based on a meter. The typical cost for electricity is EUR 11/sqm/year.
Water: Water costs are normally included in the service charges, based on the area occupied. If it is not included
in the service charges, the cost is based on a meter. Typical cost for water is EUR 0.5/sqm/year.
Heat: Heating costs are normally included in the service charges, based on the area occupied. If it is not
included in the service charges, the cost is based on a meter. Typical cost for heating is EUR 6.5/sqm/year.
Fit-Out
Traditionally, the landlord provides painted perimeter walls and ceiling tile with lighting, whereas the tenant pays
for partitions, carpeting, unit air conditioning and above-standard improvements, such as marble fooring, paneled
walls, etc. Sometimes the landlord builds the space to suit the tenant, and then recovers the costs in the rent; however,
this is negotiable and varies by landlord.
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Fit-out costs for Class A or Prime buildings in the Netherlands normally range from EUR 7501000/sqm including
construction, furniture, wiring, design fees, etc., for a lettable foor area of 5000 sqm.
Restoration
At lease expiration, tenants must usually remove, at tenants expense, tenant-installed improvements. Improvements
installed by the landlord may be returned with reasonable wear and tear.
Normally, parties agree to a bank guarantee of three months rent and three months service charges plus VAT. In
some cases, the tenant makes a deposit. The amount of the bank guarantee that the landlord requires sometimes
depends on the fnancial strength of the tenant but a three-month obligation is typically minimum or standard.
Generally, a Dutch bank account is required.
Car Parking
Local authorities determine the car-parking policy. Tenants pay for parking in almost all locations. Charges for park-
ing are quoted in EUR per parking space per annum excluding VAT, and are normally payable quarterly in advance.
In most Dutch inner cities, parking in a public zone is by means of licenses and tickets from a ticket machine.
Insurance: The tenant must insure for fre, water damage, and actions arising from third-party claims against
negligence.
Repairs to the leased premises.
TRANSACTION COSTS
Agency Fees
New Lease and Sublease: The represented party pays 12.518% of the frst years rent, sometimes subject to a
minimum. Generally, 19% VAT applies.
Lease Renewal: The tenant typically pays 1012% of the frst years rent, sometimes subject to a minimum.
Sale: The buyer and seller each typically pay their agents 2%.
Fees for legal counsel, assistance of a tax specialist, and for a project manager are also possible. The party involved
pays them directly.
General
Netherlands law provides almost nothing concerning offce leases, except for one article (7:230a BW) which states
that after the lease ends, the lessee is entitled to extend under specifc circumstances with a maximum of one year
before landlord is allowed to evict the space.
Standard Lease
Most leases are based on a template with standard text decreed by Raad voor Onroerende Zaken (Council for Real
Estate) on July 30, 2003. The parties fll in the open sections and amend the template as necessary. Any additions or
changes to the standard text are normally put in italics or boldface to make them recognizable.
Any major amendments or additions, such as a right of frst refusal or changes to the General Conditions, are
normally put at the end of the lease in a separate Special Conditions section.
It is generally advisable that tenants negotiate some amendments to get a more even balance between landlord and
tenant responsibilities and rights.
The Council is not liable for any adverse consequences of the use of standard text.
Right to Sublet
In recent years, subleasing has become more common. It usually requires landlord approval.
Netherlands
Option to Expand
An option to expand is not typical.
A right of frst refusal for other space in the building is negotiable.
An explicit late delivery clause can be negotiable, but is typical only with new buildings.
Holdover by Tenant
A holdover clause is not typical.
A tenants signage on a building and a tenants naming of a building are negotiable and commonly granted, but
subject to local municipality regulations.
Transparency
Comparables, which identify tenants and lease terms are generally available for Amsterdam. The Dutch real estate
market is becoming increasingly transparent but is still less so than in the U.K. market. Two main property journals,
PropertyNL and Vastgoedmarkt, report most commercial transactions.
No commonly accepted way to classify offce buildings exists in the Netherlands.
CB Richard Ellis, The Netherlands
Rienk Baarsma
Associate Director Global Corporate Services
+31 20 62 62 691
rienk.baarsma@cbre.com
Remco Kroeze
Director Global Corporate Services EMEA
+31 20 62 62 691
remco.kroeze@cbre.com
About CBRE The Netherlands: http://www.cbre.nl/nl_en
For Local Market Reports: http://www.cbre.nl/nl_en/research
Netherlands
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NORWAY
Atrium AS (Part of the
CB Richard Ellis Network)
Oslo
+47 40 00 57 66
SWEDEN
FINLAND
ESTONIA
RUSSIA
NORWAY
Oslo
LEASE LENGTH
Lease Term
In late 2010, lease terms in Norway are typically four to six years, even for relatively large spaces. Lease terms in
new buildings are normally 810 years. From the turn of the market in 2008, the market went from a landlords to a
tenants market, resulting in generally shorter leases, especially for existing space. This situation is expected to prevail
well into 2011.
Break
Options to break are negotiable.
Renewal
Options to renew are negotiable.
SPACE MEASUREMENT
Gross Areas-BTA
Norway has a standard measurement code, NS 3940 (Norwegian Standard). The quoted area, known as gross
areas-BTA, measures from the outside of external walls to the middle of internal walls, plus a percentage of common
areas, such as staircases, elevators and shafts.
Effciency
A typical ratio of carpetable area to gross area-BTA in a Class A building in Oslo is 7075%.
OCCUPANCY COSTS
Rent
Net Rent Quoted: Rents are quoted net in Norwegian Kroner (NOK) per square meter per year.
Free Rent: In 20072008, when the market favored landlords, rent-free periods were not given. Despite the turn
of the market in 2008 most landlords still do not give free rent.
AFFILIATE OFFICE
Rent Indexed Annually: Rent is indexed annually, normally by 100% of CPI, sometimes 80% of CPI.
Costs Included in Rent: building repairs, building equipment repairs, building insurance, ft-out costs (see below).
Service Charge
The tenant pays for heat, electricity, and other services (interior cleaning, snow and garbage removal, etc.) at current
rates. Building security costs are included in the service charge, and depend on types of security: video surveillance,
patrolling by guard, etc.
Typical service charges range from EUR 3140/sqm/year. For Class A space, EUR 40/sqm/year is typical.
Taxes
Value Added Tax (VAT): Since 2005, the tenant has paid a standard rate of 25%, recoverable on rent, service charge,
utilities, etc.
Utilities
Water is normally free of charge.
Electricity for heating is normally a part of the buildings heating system and therefore incorporated in the service
charge.
For electricity used in the premises for lighting and offce equipement, the tenant pays the electric company directly
based on a meter.
Fit-Out
Total ft-out costs for Class A or Prime buildings normally range from NOK 25004000 per square meter, which
includes construction, wiring, design fees, etc.
The landlord normally builds and pays for the ft-out, excluding furniture, and recovers these costs in rent. This ft-out
normally includes interior partitions, lighting, electrical, air conditioning, carpeting, normal fnishes, and IT wiring. If
the tenant requires a very expensive or custom installation, the landlord still may pay for the ft out, depending on the
lease term and the solidity of the lessee.
The landlord very rarely pays for furniture.
Restoration
The tenant usually must remove its improvements prior to expiration of the lease.
A security deposit is normally for 36 months rent. The landlord normally returns it with interest when the tenant
vacates, provided that the tenant has met its obligations and returned the premises undamaged except for normal
wear and tear.
The tenant pays for repairs to the leased premises.
TRANSACTION COSTS
Agency Fees
New Lease or Sublease: The landlord or sublessor normally pays agency fees equal to two months rent based
on one years normalized rent regardless of lease length, plus 25% VAT. Normalized rent means rent which
does not consider rent-free periods, rents that increase over time, etc., and will include rent for parking and
storage but exclusive of common costs.
If an agent represents the tenant, the landlord usually pays the tenants agency fees. However, in some in-
stances, the tenant prefers to pay its agent directly. Either way, the tenants agent normally receives 1015% of
the frst years normalized rent + VAT.
Lease Renewal: Normally up 9.75% (i.e., up to 65% of a full lease acquisitions fee of 15%). If the landlord is the
client, the landlord usually pays the fee. If the tenant is the client, the tenant usually pays the fee.
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Except for legal fees (if legal issues are not handled by the agent), tenants do not pay other transaction costs. Agents
can give advice on legal issues, and CBRE has in-house lawyers to assist. No laws prohibit agents from giving legal
advice, but clients are advised to use their own lawyers in more complex legal cases.
General
Lease documents in Norway are typically only 812 pages long, not including the appendix, specifcations, and draw-
ings, even for relatively large spaces. The Landlord and Tenants Act governs if anything is missing in the contract.
The standard lease agreement for commercial properties by Huseiernes Landsforbund, Foreningen Nringseiendom
and Forum for Nringmeglere/Norges Eiendomsmeglerforbund is frequently used.
Option to Expand
Sometimes negotiable.
The lease agreement seldom addresses this rare issue, and so parties normally negotiate a free rent period if the
landlord delivers late.
Holdover by Tenant
Holdover is very rare, so a typical lease agreement does not address it. Parties normally agree on a penalty after a
holdover. If they fail to agree, the eviction process takes about two weeks.
Exterior Signage and Naming of Building
This depends on tenant size and building location. The tenant normally pays the cost. Government permission is often
necessary.
Transparency
No offcial statistics on comparable transactions exist. Some information is available for Oslo, but real estate com-
panies rarely reveal tenant names.
No offcial classifcation system exists.
Atrium AS (Part of the CB Richard Ellis Network), Norway
Jon Tufte-Johnsen
Director Corporate Services
+47 92 02 99 29
jtj@cbre.no
About CBRE Norway: http://www.cbre.no/eng/
For Local Market Reports: http://www.cbre.no/eng/index.php?id=16
Norway
POLAND
Warsaw
+48 22 544 8000
DEN.
SWEDEN
POLAND
GERMANY
RUSSIA
LITHUANIA
BELARUS
UKRAINE
ROMANIA
HUNGARY
SLOVAKIA
CZECH
REPUBLIC
Warsaw
LEASE LENGTH
Term
A lease agreement can have a fxed or indefnite term.
The most common type of lease agreement for domestic and international tenants is a standard fxed-term one. In
new offce buildings it usually ranges from 37 years. The maximum offce lease length for companies under Polish
law is 30 years. A tenant can remain in a space beyond 30 years by signing a new agreement for a fxed or indefnite
term.
After a fxed term ends, the lease automatically becomes a lease for an indefnite term.
Leases entered into for an indefnite period of time may be terminated by either party upon an agreed termination
notice, or, in the absence of the respective contractual provision, upon statutory notice (usually three months). Leases
entered into for a defnite period of time may be terminated only for reasons specifed in the agreement or in law
from landlord or tenant site.
Renewal
Fixed-term leases may incorporate an automatic renewal clause that requires 612 months notice for termination.
Termination
Options to terminate are more common in fxed-term leases over 10 years, although shorter leases sometimes
include a break option, which allows the tenant to end the lease with a cancellation penalty.
SPACE MEASUREMENT
Gross Rentable Area
The landlord usually quotes the gross lettable area, which includes the usable internal area plus a share of the com-
mon area (elevator lobby, main reception), according to Polish standards.
Effciency
Thus the ratio of net rentable area to gross rentable area for a Class A building in Warsaw is 9095%.
CBRE OFFICE
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OCCUPANCY COSTS
Rent Quoted: Rent is usually quoted net in EUR. Since Polands EU Accession, rents are occasionally quoted
in U.S. dollars (USD) or Swiss francs (CHF). Leases are expected to become fully EUR denominated upon its
adoption in Poland, which may be no sooner than 2013. Before January 2009, payments, including rent, could
only be denominated in the Polish currency (PLN). Since January 2009, parties have the option to pay in any
currency, as agreed.
Rent Payable: Rent is payable in advance monthly or very rarely, quarterly. VAT of 23% is payable on rents and
sales in transactions between companies.
Free Rent: Rent-free periods range from 39 months, depending on lease length, the landlords contribution to
ft-out and other capital costs.
Rent Escalation: Rents are subject to annual indexation to Euro-Zone or U.S. CPI.
The landlord pays for structural repairs, repairs to common parts, building insurance, local taxes and sewerage
charges.
Service Charges
Service charges include water, electricity, security, heating, air conditioning, service, cleaning of common areas and
all other maintenance and operation costs of the building and common areas. Service charges also include property
taxes, building insurance, and building security.
The tenant pays the landlord service charges, usually in PLN; sometimes in EUR, plus 23% VAT.
Typical service charges in a Class A building in Warsaw are between EUR 4.506.00/sqm/month.
Taxes
Property taxes are paid by property owner.
Utilities
The tenant pays for electricity consumption separately from service charges.
The tenant usually arranges with and pays telecomunications suppliers directly.
Water fee is usually included in service charge.
Fit-Out
The landlord gives the tenant a budget for ft-out and fnishes space up to the amount of the budget. The tenant covers
any expenses above the budget. Standard ft-out costs for Class A or Prime buildings in major cities normally range
from EUR 180250/sqm, including construction, furniture, wiring, design fees, etc.
Restoration
The landlord usually accepts the premises with normal wear and tear and without restoration. Tenants usually have
no reinstatement obligations related to its premises. The landlord usually accepts the normal wear and tear of the
leased area.
Three to six months rent or a bank guarantee for six months rent is typical.
Car Parking
The tenant pays extra for parking. The fee for a parking space can be EUR 50200 per month. Parking spaces are
allocated according to a parking ratio, usually one space per 90100 sqm in the central business district; one space
per 70 sqm in the City Centre; and one space per 2530 sqm (with one per 50 sqm acceptable depending on local
public transportation in non-central areas).
Insurance: The tenant pays for third-party insurance and insurance of rented premises. In addition to rent and service
charges, tenants are obliged to pay 23% Value Added Tax (VAT).
Poland
TRANSACTION COSTS
Agency Fees
New Lease: between 1216% of annual rent paid by landlord or tenant.
Renewal: 8.33%15% paid by tenant.
Sublease: 8.33% paid by tenant or subtenant (depending on which party is represented by agent).
Legal Fee: The landlords lawyers usually prepare the lease agreement. Each party pays its own lawyers.
Notary fees: Optional Cost, applies to acquisition of property.
Registration Duty: Optional Cost, applies to acquisition of property.
Standard leases are triple net leases (operational costs, insurance and taxes paid by tenant).
Right to Sublet
Subleasing is subject to the landlords written consent and sometimes restricted.
Option to Expand
Negotiable.
If a landlord delivers the premises late, a tenant pays no rent for the duration of delay, and can terminate the agree-
ment if agreed in the contract.
Holdover by Tenant
The tenant pays a penalty, negotiated and stipulated in the contract, typically 100200% of rent for every day of delay.
Signage costs depend on the landlords policy, and can be free of charge.
Transparency
The Warsaw Research Forum collects and shares offce data on modern stock, completions, take-up and vacancy
rates in Warsaw and other cities, but does not share rents and incentives.
Modern Offce Standards established a benchmark standard for offce space in the fast developing Polish offce
market. Below there is an extract from the guide. The full text can be found at www.mosp.pl.
Location Criteria: Location is considered to be perhaps the most important element in determining an offce
buildings class status. Only primary locations within the central business districts (CBD) or a signifcant business
park can really be considered as Class A locations. This part of the classifcation system is therefore the primary
designation in our classifcation guide.
- Class A location: Primary locations within the central business districts (CBD) and major or prestigious business
park locations with excellent transportation connections and a variety of local amenities.
- Class B location: Secondary locations on the periphery of CBDs or on industrial or offce estates located
outside the CBD. These are good offce locations with good transportation connections and services.
- Class C location: Any other location not defned as class A or B.
Quality Criteria
- Class A offce buildings should meet at least 17 out of 20 standard specifcations: 12 obligatory + 5
additional.
- Class B+ offce buildings should meet 15 out of 20 standard specifcations: 12 obligatory + 3 additional.
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- Class B offce buildings should meet 13 out of 20 standard specifcations: 12 obligatory + 1 additional.
- Class C buildings meet 12 or fewer out of 20 standard requirements.
Obligatory specifcations
1. Lobby/Reception: Well designed lobby/reception with 24-hour concierge, appropriately sized and designed
for the building size and use.
2. Common Parts Provision: Cores are to be well-planned and appropriately sized to service the building
occupants.
3. Car Park and Servicing: Good accessibility and car park provision for tenants and visitors; good access for
deliveries and building management services are essential for modern offce buildings.
4. Lift Service: Minimum lift service with a maximum waiting time of 30 seconds.
5. Ceilings and Lighting: Modern ceilings with effcient lighting to meet minimum standards.
6. Small Power: Good small power provision meeting minimum requirements.
7. BMS Systems: A modern BMS system to control access and security, fre, life safety and other building
services.
8. Cabling: Provision of space for cabling and IT infrastructure.
9. Power Supplies: Provision of multiple power sources to ensure a constant power supply in the event of a local
power grid failure.
10. Structure: Minimum structural loading foor capacities for each offce foor level with an area allocated for
high-loading levels on each foor.
11. Heating, Cooling & Ventilation: Provision of a modern system of heating, cooling, ventilation and humidity
control to achieve good quality of internal climate.
12. Noise: A quiet offce environment to meet minimum standards.
Additional specifcations
1. Landmark Status: A landmark building recognized in a local context by brand name, visibility or both.
2. Internal Layout and Grids: A highly fexible internal design, fexible layout grid and effcient plan with a good
net to gross ratio.
3. Tenants Plant Space Provision: Capability to accommodate tenants additional services such as IT rooms,
satellite dishes, UPS, etc., within the building.
4. Floors: Provision of a raised foor with a minimum clear service zone of 90 mm.
5. Amenities: Good local provision of amenities either on site or close by.
6. Day lighting: Good levels of natural day lighting, minimum 70% of net lettable area within 6m of an external
window, minimum foor to ceiling height of 2.7m.
7. Environmental Standards: Achieving one of LEED Gold Standard or BREEAM Standard Very Good.
8. Carbon Reduction: Achieving a minimum of 10% carbon reduction when measured against current Polish
building standards.
CB Richard Ellis, Poland
Colin Waddell
Managing Director,
+48 22 544 8000
colin.waddell@cbre.com
About CBRE Poland: http://www.cbre.pl/pl_en
For Local Market Reports: http://www.cbre.pl/pl_en/research
Poland
PORTUGAL
Lisbon
+351 21 311 44 00
Porto
+351 22 616 72 40
SPAIN
PORTUGAL
Porto
Lisbon
CBRE OFFICES
LEASE LENGTH
Term
Leases can be of any length up to 30 years. Five years is typical.
Break
The law permits that parties may negotiate a leave break. A break option by the end of the third year is common with
a fve-year lease.
Renewal
The law permits parties to negotiate renewals.
SPACE MEASUREMENT
Gross Lettable Area
Measurements of offce properties are generally on a gross lettable area (GLA) basis for rental, although some
property owners occasionally quote gross construction area (GCA).
For offce properties: GLA extends to the centerline of party walls, includes external walls, and a proportion of com-
mon areas of each multi-tenanted foor. GLA excludes areas of vertical circulation, such as stairs, elevators, and ducts.
Effciency
A typical ratio of carpetable area to gross lettable area in a Class A building in Lisbon is 8285%.
OCCUPANCY COSTS
Rent
Net Rental Quoted: The landlord quotes rents net of service charge in EUR/sqm/mo.
Rent Payable: The tenant pays both rent and service charges monthly in advance.
Free Rent: One month is typical for each year of the contract for offce spaces larger than 500 sqm.
Rent Escalation: Leases include annual indexation, with escalations at 75100% of government-published CPI.
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Service Charges
Service charges in Lisbons CBD generally range from EUR 2.54.0/sqm/month, depending on the area of the build-
ing and services provided. The service charge is the tenants proportionate contribution of the cost of maintaining
common areas and services. They cover:
Utilities: Gas, water and electricity in common areas only, as tenant pays for these in tenants premises.
Technical Maintenance: Air conditioning, electrical.
Cleaning of common areas only.
Building Security.
Fire and Intruder Alarms.
Gardening.
Reception: Including reception telephone lines.
Building repairs.
Administration fees.
Insurance Cost: The landlord pays a multi-risk insurance for the building. Some leases provide that the tenant
reimburse the landlord for this cost through the service charges.
Taxes
Municipal Property Tax: The landlord pays annual municipal property tax. Occasionally, the tenant agrees in a
lease contract to reimburse this cost to the landlord through the service charge. This tax varies from 0.20.5% of
the revalued fscal value, and between 0.40.8% of the existing fscal value. The fscal value (valor patrimonial)
of property is recorded in the land register. Within these ranges, the individual municipality determines the rate.
The rate in Lisbon is 0.4% of the revalued fscal value or 0.7% of the existing fscal value.
Value Added Tax (VAT): VAT is payable on the service charge. The rate is 6% on electricity, water, security, and
fre alarms, and 23% on all other costs. Lease and sale of commercial property are by law exempt of VAT.
However, the landlord can apply for a VAT exemption waiver, in order to recover costs from the tenant. In order
to qualify for a VAT exemption waiver, several conditions must be met, including these and others:
- The real estate transaction must include the entire property.
- The vendor or landlord and purchaser or tenant must have organized accountancy according to personal
income tax and corporate income tax codes. Non-resident entities and entities without permanent establish-
ment are therefore excluded.
- The vendor or landlord and purchaser or tenant activity must be subject to VAT. Financial institutions, medical
services, educational services, and some others are not subject to VAT.
- The annual rent must be more than 4% of the acquisition price or construction price. This stipulates a minimum
market yield of 4%.
Utilities
Electricity: The tenant pays for electricity, including electricity to operate central air conditioning in its space. The
tenant normally contracts with and pays the supplier directly.
Water: The tenant pays for water. The tenant normally contracts with and pays the supplier directly.
Telephone Lines: Tenants pay for lines in their premises.
Fit-out
Landlord Work: The landlord normally provides fnished open space with suspended ceilings, ceiling lighting,
raised foors, air conditioning, and kitchenettes. For second-hand space in multi-tenanted buildings, the landlord
sometimes includes the interior partitions and other improvements left from the former tenant.
Tenant Work: The tenant usually performs the ft-out and can choose any qualifed architects, engineers, and
contractors. Landlords require prior approval of the ft-out, and require insurance.
Fit-out costs for Class A or Prime buildings in major cities normally range from EUR 500750/sqm including
construction, furniture, wiring, design fees, etc.
Portugal
Restoration
The tenant normally must restore the space to its state when the tenant frst occupied it, although this is negotiable.
The security deposit is negotiable and is usually a bank guarantee equivalent to six months rent, including offce
space, car parking, and service charge.
Car Parking
The tenant typically pays for parking spaces, normally allocated according to the leased area.
Repairs within tenants premises.
Insurance: The tenant pays for multi-risk insurance to cover damages the tenant causes to the premises or the
building.
TRANSACTION COSTS
Agency Fees
The landlord typically pays its agent a fee of 1215% of the annual rent agreed plus VAT. Most tenants do not engage
an agent to represent them.
Tenant representation only happens with multinational corporate clients of international real estate companies, for
which the tenant typically pays its agent a fee of 10% of the annual rent agreed plus VAT.
Legal Fees: The tenant pays a lawyer to review and negotiate the terms of the draft contract that the landlord
provides.
Stamp Duty for Leases: The landlord pays 0.10% of frst months rent.
Notary and Registry Fees: Only sales transactions, not lease contracts, are subject to registry and registry fees.
Notary and registry fees are a fxed amount, based on legal statute, not on purchase price.
Lease Law
The Portuguese lease law came into force at the end of June 2006. It brought several signifcant changes to non-
residential offce lease law, namely:
Controlled updates of old lease rents prior to 1995. The process of updating will have to occur over a transi-
tional period of generally fve years, at the end of which the updated annual rental amount cannot exceed 4% of
the value of premises.
Flexibility: With a new lease, both parties can freely agree to contractual conditions, including term, options to
terminate the contract, and contract renewals.
Standard lease contracts are not used in Portugal. However, the lease law, Novo Regime de Arrendamento Urbano
(NRAU), which is part of the civil code, covers most terms of a typical lease contract. Parties are free to negotiate most
of these terms.
Right to Sublet
Subleasing is negotiable and permissible unless the tenant (i.e., the sublessor) is paying VAT on the rent.
The VAT code stipulates that real estate lease transactions are exempt of VAT. However with the recent law N 21/2007,
the Government introduced a set of changes in VAT legislation. Now, in order to qualify for a VAT exemption waiver,
several conditions have to be met, one of them being the prohibition of subletting if VAT is applicable to rent.
When subleasing is permitted, it normally requires written landlord approval.
Right to Expand
Negotiable.
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Each case is negotiable. Parties address this in the lease contract. It is more frequent to have a clause regarding late
delivery of the premises in contracts involving buildings where construction is not complete.
Holdover by Tenant
Each case is negotiable and specifed in the lease contract.
The landlord and the municipality must approve exterior signage on the building.
No commonly used building classifcation system exists. A high-quality building (comparable to Grade A) is energy
effcient and includes suspended ceilings, ceiling lighting, raised foors, a ceiling height that is 3m from the raised
foor to the false ceiling, central air conditioning and kitchenettes; as well as services such as cleaning of common
areas, 24-hour security, lobby with reception, good parking space, etc.
Transparency
The property market in Portugal is generally less transparent than more mature European property markets. Agents
rarely share transaction details. However, a third party (Imomtrica) collects information from major market agents
regarding offce transactions in the Lisbon market, and delivers to these agents information regarding total take-up,
average and prime rental values, total stock, and vacancy rates, on a quarterly basis.
CB Richard Ellis, Portugal
Cristina Arouca
Associate Director, Research and Consultancy Department
+351 21 311 44 00
cristina.arouca@cbre.com
About CBRE Portugal: http://www.cbre.pt/pt_en/
For Local Market Reports: http://www.cbre.pt/pt_en/research
Portugal
ROMANIA
Bucharest
+40 21 313 10 20
UKRAINE
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HUNGARY
SLOVAKIA
SERBIA
BULGARIA
Bucharest
LEASE LENGTH
Term
Leases can be of any length. A normal minimum lease length is fve years with a break option at three years. A shorter
lease term is typical for Class B offce buildings located in less attractive areas.
Break
There is no rule or law on break options. The civil codes stipulations regarding break options are not mandatory.
We estimate that the number of fve-year leases that include a break option at the third year increased considerably
in 2010.
Renewal
The majority of contracts include renewal options.
SPACE MEASUREMENT
Gross Rentable Area
Landlords quote gross rentable area in square meters. Parties generally use either BOMA standards or German GIF
Guidelines to establish the rentable area, but neither is yet an offcial standard.
Gross rentable area includes restrooms (if they are within the premises) and an add-on building factor. On multi-
tenant foors, space occupied by restrooms and other common areas is allocated proportionally to all tenants on the
foor.
Gross rentable area excludes staircases, elevator shafts, and non-load-bearing inner walls.
Effciency
A typical ratio of carpetable area to gross rentable area in a Class A building in Bucharest is 8890%. For a high-rise
building it could be as low as 81%.
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OCCUPANCY COSTS
Rent
Rent Quoted: Rent is quoted as base rent in EUR/sqm/month.
Rent Paid: The tenant usually pays rent quarterly or monthly in advance. Rents are denominated in EUR and paid
in local currency, Romania New Lei (RON). VAT is paid in addition. The VAT rate is 24%.
Rent Payable in Advance: Landlords usually require three months advance payment.
Free Rent: Tenants may negotiate up to four months of free rent for a normal lease contract.
Rent Escalation: Annual indexation with EUR CPI has become common for Class A and new Class B offce
buildings. Rent is reviewed (i.e., reviewed and adjusted) as negotiated, generally at the execution of an option.
The rent review typically includes a review of rent per square meter, lease length, break option, and payment
method.
Since early 2009, stepped rent (i.e., increased based rent in future years) is more commonly included in new
lease contracts, in non-central areas, or for very large leased areas. Stepped rent normally includes indexation
of rent.
Service Charge
The landlord estimates operating expenses at the start of each year and the tenant pays monthly based upon these
estimates. At year-end, the landlord charges or credits the tenant based on fnal costs.
The service charge (typically EUR 3.54.5/sqm/month) pays for the tenants proportional share of:
Property Insurance: The landlord pays for building insurance as well as insurance for all public areas, parking
and third-party insurance for the building and public areas. In the vast majority of cases (over 90%), the insur-
ance costs are passed on to the tenant via service charges.
Local property taxes: Typically EUR 1.5 per square meter.
Electricity, Gas, Garbage, Water and Other Variable Costs: Typically EUR 1.5 per square meter.
Facility Management: This includes maintenance of electromechanical systems, air conditioning, electricity,
gas and water (of common areas), cleaning, plumbing, drainage, sewerage and gardening, security (24-hour
security and daytime concierge), and typically is EUR 11.2 per square meter. Increasingly, tenants negotiate a
maximum (a cap) for facility management fees.
Management Fee: Typically EUR 0.2 per square meter.
Taxes
Local property taxes are included in the service charge.
VAT for service charges is paid in addition (24%).
Utilities
Tenants may pay for electricity, gas and water used in the premises, as measured by a direct meter.
Tenants pay for telephone and Internet.
Fit-Out
Landlord Work: The landlord typically delivers space with suspended ceilings, ceiling lighting, carpeting, HVAC
distribution, sprinklers and common washrooms.
Tenant Work: Some landlords contribute with 2060% of the total ft-out costs. Tenants need to receive the
landlords approval for the ft-out and design documents, before any construction work begins.
Cost of Tenant Work: Fit-out costs for Class A buildings in Bucharest normally range from EUR 150 to 250 per
sqm including hard costs (construction, wiring) and soft costs (design fees, architecture, engineers), etc.
Restoration
The tenant usually must return the premises at lease termination in good order, with reasonable wear and tear. This
is negotiable. Sometimes landlords require the premises returned to its original state with no partitioning walls.
Romania
A cash deposit or bank guarantee equivalent to three months rent is usually required from all tenants. If a parent
company guarantee is required, then the sum is equivalent to six months rent. Any cash deposit is put into an escrow
account and the potential interest is divided 50%50% between the tenant and the landlord.
Car Parking
Parking spaces are leased at an additional cost to the tenant as follows:
Central Locations: Parking spaces lease for EUR 100200 per month for each underground parking space and
EUR 80100 per month for off-street space.
Non-Central Locations: Underground spaces lease for EUR 80100 per month; spaces above ground lease for
EUR 4050 per month.
Parking spaces are distributed proportionally according to leased space. For newly constructed buildings, the
Romanian construction law provides for one parking space, underground or above ground, for every 50 sqm of
leased space. If the required parking spaces are not provided, the landlord pays a fne of EUR 10,000 for each
missing parking space.
Cleaning of the tenants premises.
Extra security guards.
Third party insurance.
External and Structural Repairs: The landlord pays for external and structural repairs, common area repairs,
electro-mechanical system repairs inside the leased premises, and interior repairs of damage not caused by
the tenant. In general, in multi-tenant buildings these repairs are paid by the landlord, while for single-tenant
buildings the repair costs are passed on to the tenant via service charges.
TRANSACTION COSTS
Agency Fees
Romania is an open-listing market, where both the landlord and the tenant pay an agency fee to the agent that
represented them in the transaction. The landlord and the tenant can be represented by the same agency, as different
brokers from the same agency represent the parties. If the tenant is not represented, the landlord pays its agent, and
the tenant does not pay an agency fee.
For New Leases: The landlord pays an agency fee of 1224% of the frst full years rent + 24% VAT. The fee of
24% is asked for new signed pre-leases for future offce buildings. For new leases the tenant pays an agency fee
of 1016%.
For Lease Renewals: The landlord and the tenant pay an agency fee of 8.33%, each party to the agent that
represented them during the transaction.
Each party pays its lawyer. A tenants legal fees are typically about 0.5% of the total value of the contract, and
are likely to be lower on large transactions.
There are no stamp duty fees applicable.
General
The principles and regulations included within the Civil Code are guide-use only, with no mandatory effect.
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Right to Sublet
The tenant can sublet the leased premises to its companys affliates and to other companies, only with the landlords
consent. Because the Civil Code stipulates that sublease is permitted without the landlords consent, with the exception
of an agreed interdiction, lease contracts routinely include a sublease that requires landlord consent.
Option to Expand
An option to expand and a right of frst refusal are negotiable.
The contract usually provides for a day of free rent for each day of delayed delivery.
Holdover by Tenant
If a tenant remains in the space beyond the agreed date, it pays penalties by agreement in the lease.
Negotiable. Buildings rarely have tenant names, although several exist in Bucharest.
Offce occupiers normally lease, and do not own, the space they occupy.
Transparency
Financial terms of completed deals are not always available, although asking rents and lease length are generally
available for recent transactions. The local press rarely prints deal terms.
The National Offce for Prevention and Fight against Money Laundering requires real estate companies to report cash
transactions over EUR 10,000 and any suspicious operations.
Class A Buildings
- Central or business location.
- Easy public transportation access, especially subway access.
- At least 1000 sqm gross rentable area for each foor.
- At least one parking unit for each 50 gross rentable sqm.
- New or reconstructed offce building.
- 4-pipe HVAC or similar system.
- Raised foors or suspended ceilings.
- Slab-to-slab height of 3.6 meters or better (no less than 2.7 meters from the top of the fnished foor and to
the suspended ceilings).
- Advanced building management and security system.
- Excellent utility capacity.
- Modern high-speed elevators of suffcient capacity.
- International standard property management, a professional, experienced landlord.
- Proper legal documentation.
Class B Buildings
- Sub-market location.
- Poor public transportation access.
- 4-pipe HVAC or similar system.
- Raised foors or suspended ceilings.
- Slab-to-slab height of 3.6 meters or better (no less than 2.7 meters from the top of the fnished foor and to
the suspended ceilings).
- Building management and security system.
Romania
- Excellent utility capacity.
- Modern high-speed elevators of suffcient capacity.
- Property management, a professional, experienced landlord.
- Proper legal documentation.
Class C Buildings
- Older, partly or non-refurbished buildings.
- With or without air conditioning units.
- Less effcient foor plates.
- 24-hour security.
- Parking spaces.
- Local property management.
- Some building amenities.
CB Richard Ellis, Romania
Catalina Jigman
Head of Offce Agency and GCS
+40 21 313 10 20
catalina.jigman@cbre.com
About CBRE Romania: www.cbre.ro
For Local Market Reports: www.cbre.ro
Romania
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RUSSIA
Moscow
+7 495 258 3990
Maris Properties in
association with
CB Richard Ellis

St. Petersburg
+7 812 346 5900
LEASE LENGTH
Term
Due to the impact of the global fnancial crisis, average lease terms decreased from 57 years in 2007 to 35 years
for Class A buildings starting in 2008. Leases for Class B space are generally shorter.
Lease agreements for 11 months became more common in 2009 because they do not require state registration.
Break
In most leases for Class A buildings, a break option is possible after the third year for both parties.
Renewal
Leases typically provide for renewal options at market terms and conditions with 39 months preliminary notice.
SPACE MEASUREMENT
Defnitions
Professional landlords of new Class A developments normally use the BOMA method for usable offce area measure-
ment. However, less professional landlords (usually of Class B space) use the local system of measurement, Bureau
of Technical Inventory (BTI).
Effciency
A typical ratio of usable offce area to rentable area in a Class A building is 8890%.
OCCUPANCY COSTS
Rent
Base Rent: Rents for offce space are usually quoted in U.S. Dollars (USD), but sometimes in Euros (EUR), and
sometimes in Rubles (RUB). Rent is generally quoted and paid triple net, (also called net), which excludes taxes,
operating expenses, and insurance. However, some landlords quote, and tenants pay, a gross rent, which
includes taxes, operating expenses and insurance. In St. Petersburg, rents are generally measured in rubles and
quoted as gross rents.
CBRE OFFICES
NORWAY
SWEDEN
FINLAND
U.K.
NETH.
GERMANY
POLAND
CZ.
REP.
SLOV.
HUNG.
ROMANIA
TURKEY
SYRIA
IRAQ
IRAN
KUWAIT
SAUDI
ARABIA
KAZAKHSTAN
RUSSIA
UZBEDISTAN
TURKMENISTAN
AFGHANISTAN
TAJ.
KYRGYZSTAN
CHINA
CHINA
JAPAN
N. KOREA
MONGOLIA
UKRAINE
BELARUS
LITH.
LAT.
EST.
St. Petersburg
Moscow
Rent Payable: Tenants typically pay rent and operating expenses quarterly in advance. In St. Petersburg, tenants
typically pay rent monthly in advance.
Free Rent: Rental holidays, i.e., free rent periods, usually cover the ft-out period, and can vary from 06 months.
Rent Escalation: Rent indexation applies from the second or third year of the lease based on U.S. CPI or a fxed
percentage (usually 510%).
Operating Expenses
The defnition of operating expenses and quality of operating expenses vary extensively from building to building.
Operating expenses for Class A premises in Moscow average USD 110140/sqm/year, net of VAT. Operating ex-
penses for Class A and B premises in St. Petersburg are, on average, 2530% of the rental rate.
Typically, operating expenses cover:
Property management fees.
Utilities.
Security: Usually guards in the main lobby, a card access system, and reception issuing cards and checking
passports.
Maintenance and cleaning of common areas.
Trash removal.
Property taxes.
Building Insurance: The landlord pays for building insurance and usually passes its cost on to tenants as a part
of the operating expenses.
Taxes
Property Tax: The landlord pays the property tax. Most leases allow landlords to pass a proportional share of tax
increases to tenants. The annual property tax is equal to 2% of the book value of the building.
VAT: 18% VAT is payable on the monthly rental and service charge.
Utilities
Electricity: Tenants pay for electricity, water supply and heating, often separately according to actual consump-
tion. Utilities generally cost USD 2025/rentable sqm/year.
Extra Air Conditioning: Some Landlords only provide air conditioning within the normal service charge during
normal offce hours Monday to Friday. The tenant pays the cost of electricity supply for after-hours air condition-
ing in leased areas according to the meter. Other landlords provide air conditioning over normal offce hours
and do not charge tenants additionally.
Telephone Lines: Landlords generally provide a building telephone station and cabling to foors. Tenants are
responsible for contracting for telecommunications services on foors.
Fit-Out
Landlord Work: Handover condition for new international standard buildings is generally shell and core, typically
with fnished common areas, fully functional restrooms, heat distribution throughout, elevators, base building
mechanical systems and an operational fre safety system. Restrooms are typically inside the tenants premises
and considered tenant work. Second-generation premises are generally offered as-is.
Tenant Work: The landlord usually performs construction, although some landlords allow the use of tenants
architects, engineers, and contractors. Sometimes ft-out allowances depend on whether the tenant or the land-
lord hires the contractor. If the landlord offers a ft-out package, supervision and review of design documents is
usually included. Some tenants hire a project manager for quality and cost control, or to oversee non-standard
work, or for special technical systems such as the computer server room.
Tenant Work Cost: The standard ft-out cost is worth about USD 700900/sqm. International companies usually
spend USD 400700/sqm beyond the standard ft-out cost. These costs include construction, furniture, wiring,
design fees, etc.
Restoration
Restoration is not usually required.
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Depending upon the property and the tenants covenant, a security deposit can range from no deposit to the equiva-
lent of three months base rent. The landlord typically holds the security deposit for the term and returns it to the
tenant without interest.
Repairs: The tenant pays costs for repairs inside offce premises.
Third Party Insurance: The tenant generally pays for third-party insurance.
Additional Costs that Tenants Sometimes Pay
Security personnel on offce foors if needed.
Car Parking: Tenants are typically allocated one parking space per 100 sqm leased, and pay for parking spaces
separately from the offce rent.
TRANSACTION COSTS
Agency Fees
New Lease: Both landlords and tenants can use agents or advisors to represent them in transactions and each
party pays a fee to its agent. Agent fees are usually 812% of the annual contract net rent, depending on the
size and scope of services provided. Depending on the deal structure, either the landlord or the tenant, or both,
pay the fee. VAT is additional.
Lease Renewal: 57%.
Legal Fees: The landlords solicitors normally prepare the lease agreement. However, it is often preferable for a
tenant to provide lease text in negotiations. Legal fees vary widely depending upon the role of legal counsel.
Stamp Duty: No stamp duty exists.
Lease Registration Costs: The landlord and the tenant generally split these costs equally.
General
The Russian Civil Code grants preferential renewal rights to existing tenants. These rights generally are negotiable.
Reasonable legal protection exists, with standards for dealing with leasing contracts and landlord responsibilities.
Parties typically sign a non-binding letter of intent in which the landlord will not actively market the space and the
tenant and landlord agree to sign a binding agreement.
Many transactions for Class A space are on newly built space for which the landlord does not expect to have title until
several months after state commissioning. In the interim, the tenant can occupy the space based on a preliminary
agreement that later becomes part of the full lease agreement, which is executed once title is received.
When a tenant leases space that is not newly built, the parties sign a lease without a preliminary agreement.
There are no standard lease contracts. Each landlords solicitors prepare a lease contract.
Right to Sublet
Subletting is a common right, subject to landlords approval, not unreasonably withheld.
Option to Expand
This is achievable for anchor tenants.
For a lease extension, a right of frst refusal is standard. For expansion space, it is typically achieved only by anchor
tenants.
Russia
A typical penalty is one day rent-free for each day of delay.
Holdover by Tenant
Penalties can range from 140200% of rent.
Signage can be permitted in lobby and foor entrance areas. Large tenants can negotiate external signage in front
of the main entrance, or occasionally, on the building itself. Additional charges can be incurred for signage. A major
tenant sometimes gets naming rights.
Transparency
For Moscow, comparables, which identify names of tenants, square meters, rents and incentives, are generally avail-
able for recent transactions.
Building classifcation applies to modern offce stock only (Class A, Class B+, and Class B). To be classifed as
Class A, Class B+, or Class B, a building should meet all relevant criteria except for one Must criterion and four
Optional criteria. Buildings that do not meet the above parameters are classifed as Class C buildings.
Class A Buildings: Required Features:
- Building Management System (BMS).
- Heating, Ventilation and Air Conditioning (HVAC): Capacity to provide 24-hour cooling in server rooms.
Temperature in offce areas 2223 C0, +/1 C0. Fresh air supply 60 m3 per hour per ten sqm of offce
rentable space, according to planned occupancy.
- Modern fre security system.
- Elevators: Modern high-quality speed elevators from major international brands.
- Power Supply: Two independent sources of power supply with automatic change-over or diesel generator
power supply system as emergency back-up (power supply should be a minimum 70 VA of one-time electric
load per one sqm effective offce space), UPS for emergency systems.
- Security System: Modern security system and access control (including CCTV at all entrance points and park-
ing areas, electronic card access, 24-hour security personnel).
- Clear Ceiling Height 2.72.8 m and over.
- Layout: Open foor plates, effcient layout. Regular column grid not less than 6X6. Recommended: For 90%
of usable area distance from windows to columns should not be less than 4m. Floor plate not less than 1000
sqm and regular column grid 8X8 or 9X9 are more effcient.
- Loss Factor: Building loss factor not exceeding 12%. Loss factor = 1(USF/RSF) *100%. Areas are calculated
according to BOMA standards.
- Load Bearing Capacity not less than 400 kg/sqm.
- Fit-Out of Common Areas and Facade Finishing: High quality materials used in ft-out of common areas and
faade fnishing.
- Raised Floors: Building is designed for full value raised foor installation. However, this is optional for buildings
delivered before 2005.
- Location: Good building location, an absence of nearby objects that can have a negative impact on a build-
ings image (e.g., functioning industrial buildings, cemeteries, dumps, prisons, etc.).
- Transport Access: Convenient vehicular and public transport access, i.e., 1015 minute walk from nearest
metro station or an adequately organized shuttle-bus service.
- Parking Type: Underground parking or multilevel parking with covered walkway to building. Surface guest
parking. Recommended: Convenient access for cars to underground parking.
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- Parking Ratio for buildings in St. Petersburg: 1) Center of the city: not less than one space per 100 sqm of
leasable area (1/100); 2) Industrial zone: not less than 1/80; 3) Peripheral zone: not less than 1/60; 4) Along
KAD track direction: 1/40 or more.
- Single Ownership: Building is not sold by foors or blocks to different owners.
- Property Management: Professional property management company with at least fve buildings under man-
agement (at least 5000 sqm each) or with relevant international experience.
- Telecom Providers: At least two independent high-quality telecom providers in building.
- Amenities: Professionally organized staff cafeteria adequate to building size and population; and at least two
more amenities in building (ATM, news agency, dry cleaning, shops, etc.). Infrastructure nearby should also be
considered.
Class A Buildings: Optional Features:
- Floor Depth: Floor depth not more than 1820 m from window to window. Not more than 910 m from
window to foor plate core and 12 m for buildings with non-regular forms and atriums.
- Lighting and Window Grid: Modern high-quality windows providing suffcient natural lighting, rational window
grid.
- Parking Ratio for buildings in Moscow: 1) Within Garden Ring: not less than one space per 100 sqm of leas-
able area (1/100); 2) outside Garden Ring, within Third Ring Road: not less than 1/80; 3) Outside Third Ring
Road and within ten km from MKAD (alongtrack direction to city center): not less than 1/60; 4) Ten km from
MKAD (alongtrack direction to city center) and further: not less than 1/301/40.
- Transparent ownership structure.
- Lobby: Effciently organized reception area appropriate to building size, providing convenient access to
building.
Class B+ Buildings: Required Features:
- Heating, Ventilation and Air Conditioning (HVAC).
- Modern Fire Security System.
- Elevators: Modern high-quality speed elevators from major international brands.
- Layout: Open foor plates for whole or more than 50% of offce rentable area, effcient layout.
- Fit-Out of Common Areas and Faade Finishing: Quality materials used in ft-out of common areas and
faade fnishing.
- Parking Type: Organized secured parking. Recommended: Underground parking for newly constructed
buildings.
- Property Management: Well-organized property management.
Class B+ Buildings: Optional Features:
- Building Management System (BMS).
- HVAC Capacities Recommended: Capacity to provide 24-hour cooling in server rooms. Temperature in offce
areas 2223 C0, +/1 C0. Fresh air supply 60 m3 per hour per ten sqm of offce rentable space, according to
planned occupancy.
- Power Supply: Two independent sources of power supply with automatic change-over or diesel generator
- Security System: CCTV at all entrance points, 24-hour security personnel. Recommendation: Electronic card
access.
window to window to foor plate core and 12 m for buildings with non-regular forms and atriums.
Russia
- Load Bearing Capacity not less than 400 kg/ sqm.
grid.
- Transport Access: Convenient vehicular and public transport access, i.e., 1015 minute walk from nearest
metro station or an adequately organized shuttle-bus service.
- Parking Ratio for Buildings
- Moscow: 1) Within Garden Ring: not less than one space per 100 sqm of leasable area (1/100); 2) outside
Garden Ring, within Third Ring Road: not less than 1/80; 3) Outside Third Ring Road and within ten km from
MKAD (alongtrack direction to city center): not less than 1/60; 4) Ten km from MKAD (alongtrack direction
to city center) and further: not less than 1/301/40.
- St Petersburg: 1) Center of the city: not less than one space per 100 sqm of leasable area (1/100); 2) Industrial
zone: not less than 1/80; 3) Peripheral zone: not less than 1/60; 4) Along KAD track direction: 1/40 or more.
- Transparent ownership structure.
- Lobby: Effciently organized reception area appropriate to building size, providing convenient access to
building.
- Amenities: Staff cafeteria and other amenities in building (ATM, news agency, dry cleaning, shops, etc.).
Infrastructure nearby should also be considered.
Class B Buildings: Required Features:
- Modern Fire Security System.
- Elevators: Modern elevators required for three-story buildings and higher.
- Fit-out of Common Areas and Faade Finishing: Quality materials used in ft-out of common areas and
faade fnishing.
- Property Management: Well-organized property management.
Class B Buildings: Optional Features:
- Heating, Ventilation and Air Conditioning (HVAC).
- Power supply: Two independent sources of power supply with automatic change-over or diesel generator
- Security system: CCTV at all entrance points, 24-hour security personnel. Recommendation: electronic card
access.
- Layout: Open foor plates for whole or more than 50% of offce rentable area, effcient layout.
window to window to foor plate core and 12 m for buildings with non-regular forms and atriums.
- Load Bearing Capacity not less than 400 kg/sqm.
grid.
- Parking Type: Organized secured parking. Recommendation: Underground parking for newly constructed
buildings.
- Parking Ratio for Buildings.
- Moscow : 1) Within Garden Ring: not less than one space per 100 sqm of leasable area (1/100); 2) outside
Garden Ring, within Third Ring Road: not less than 1/80; 3) outside Third Ring Road and within ten km from
Russia
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MKAD (alongtrack direction to city center): not less than 1/60; 4) ten km from MKAD (alongtrack direction
to city center) and further: not less than 1/301/40.
- St. Petersburg: 1) Center of the city: not less than one space per 100 sqm of leasable area (1/100); 2)
Industrial zone: not less than 1/80; 3) Peripheral zone: not less than 1/60; 4) Along KAD track direction: 1/40
or more.
- Transparent Ownership Structure.
- Amenities: Staff cafeteria and other amenities in building (ATM, news agency, dry cleaning, shops, etc.).
Infrastructure nearby should also be considered.
CB Richard Ellis, Russia
Irina Florova
Head of Analytics
+7 495 258 39 90
irina.forova@cbre.com
Elena Efremova
+7 495 258 39 90
elena.efremova@cbre.com
Natalia Kireeva
Consultant
Maris Properties in association with CB Richard Ellis, St. Petersburg
+7 812 346 59 00
natalia.kireeva@maris-properties.ru
About CBRE Russia: http://www.cbre.ru/ru_en
For Local Market Reports: http://www.cbre.ru/ru_en/research
Russia
SERBIA
Belgrade
+381 11 22 58 777
HUNGARY
ROMANIA
BULGARIA
SERBIA
ALBANIA
MONTENEGRO
BOSNIA
CROATIA
MACEDONIA
Belgrade
LEASE LENGTH
Term
Commercial leases run for a limited number of years, usually for 35 years, with possible exit clauses with penalties
for early termination.
Renewal
The tenant has a right of renewal only if stipulated in the lease.
SPACE MEASUREMENT
Net Internal Area
Offce measurements are on Net Internal Area, which includes kitchens and restrooms, internal walls and circulation
space, but excludes vertical penetrations and structural walls.
OCCUPANCY COSTS
Rent
Recent Rental Rates: Please view our latest Belgrade Offce MarketView
Rents Quoted: Rents are normally quoted in EUR/sqm/month. Service charges and VAT are additional. Rent,
together with the service charge, is payable monthly in advance.
Free Rent: Landlords grant free rent periods of 13 months as an additional incentive. Some landlords grant free
rent periods of up to nine months for contracts exceeding fve years.
Rent Escalation: Rent increases are negotiable and may be linked to the consumer price index (CPI) and adjusted
annually.
Repairs: The landlord is normally responsible for structural repairs and external repairs. In multi-let buildings,
the landlord is responsible for major repairs to common areas. The cost is generally not recoverable from the
tenant.
AFFILIATE OFFICES
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Service Charges
The tenant pays service charges. For Grade A offce space, service charges are generally around EUR 3/sqm/month,
depending on costs included. If heating and cooling are included, the service charges can be EUR 3.23.9 /sqm/
month.
Service charges typically include:
Maintenance and repair of the common areas, car parks, surroundings and general facilities of the building.
The cost of maintenance staff, including provision of staff facilities.
Heating and air conditioning of the leased premises.
Heating, air conditioning, and all public utility costs for common areas.
Telecommunication costs of general services.
Computer-controlled fre safety systems.
The costs of employment of reception staff, security and related expenses.
Provision of sinking fund for the renewal and overhaul of equipment and installations of the building.
Cleaning, maintenance and repair of the common areas, indoor and outdoor.
Property insurance costs.
Any costs arising from governmental regulations and requirements in connection with the maintenance, repair,
replacement and renewal if required, and operation and use of the building.
Any taxes and property charges related to the building.
Management charges.
Taxes
Value Added Tax (VAT): VAT at 18% is payable on rent, service charges, agents fees, legal fees, notary costs,
and car parking. Most companies (but not banks, federations and associations) can recover VAT.
Property Tax: The local real estate tax is 0.4% of the property value, for all classes of offce space, and is recov-
erable from the tenant as a part of the service charges. The amount of tax is based on a complex calculation,
which is done by the local authorities.
Fit-Out
Landlords Work: Space is typically delivered with suspended ceilings, ceiling lighting, carpeting, raised foors,
a certain number of gypsum walls; i.e., 40 sqm of walls per each 100 sqm of space, one work station at each
1012 sqm equipped with one IT socket and two electricity sockets positioned in foor boxes.
Fit-Out: Normally includes glazed partitions, computer network and related equipment, and gypsum walls
exceeding the standard ft-out. If the tenant has a large number of offces, then certain costs may arise from
HVAC upgrading. The tenant pays for this work, which is normally executed by landlords contractors.
Fit-Out Cost: A standard ft-out budget for a Grade A building is usually around EUR 150200 per sqm.
Landlords usually require a deposit of three months gross rent, or a rental guarantee from a bank that allows the
landlord to withdraw a guaranteed sum if the tenant does not pay rent or otherwise fulfll its obligations.
Restoration
The tenant is normally responsible for restoration to original condition, unless otherwise negotiated and stipulated in
the lease.
Car Parking
Typical monthly charges are EUR 70100 per parking space per month in a garage; EUR 3050 per parking space
per month in an open parking lot.
Serbia
TRANSACTION COSTS
Agency Fees
New Lease: Each party pays up to 8.5% of one years rent to its agent. Occasionally, the landlord pays the
tenants agency fees.
Lease Renewal: The fee depends on the lease contract and the agents standard rates. Lease renewal fees
average up to 20% of a years rent.
Rent Reviews: Fees are based on savings, and are negotiable.
General
All the lease terms are governed by applicable Serbian law.
A majority of the competitive Class A offce buildings use similar lease terms and conditions.
Right to Sublet
Subleasing is rare. The landlord has the right to negotiate and approve of any subtenant.
Late deliveries are addressed in lease agreements. Most commonly, the landlord must grant one day of the rent free
for each day of late delivery.
Holdover by Tenant
No penalties apply unless stipulated in the rental agreement.
Typically, the cost of signs at the entrance is included in the rent. Additional signs and illuminated signs on the faade
and roof are normally negotiable, but legal restrictions exist, especially to protect historic buildings.
Transparency
In Belgrade, information on comparable deals (tenants, square meters, and rents) is generally available for recent
transactions. For markets outside of Belgrade, such information is diffcult to obtain.
No standard building classifcation system exists in Serbia; however, CBRE uses the following classifcations:
Grade A: These buildings have suspended ceilings and raised foors, cooling, clear ceiling height min. 2.80 m,
although for the frst district the ceiling height is not a requirement, as the clear ceiling heights of some Palais are
less than 2.80 m. A Palais is typically a historic building, originally built as a grand residence.
Grade B: If one of the criteria above is missing, the building is Grade B.
Grade C: These are older buildings without cooling, low ceiling height, and no raised foors.
CB Richard Ellis, Serbia
Goran Zivkovic
Director of Agency Services
+381 11 22 58 777
goran.zivkovic@cbre.rs
About CBRE Serbia: http://www.cbre.rs/about.php
For Local Market Reports: http://www.cbre.rs/research.php
Serbia
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AUSTRIA
HUNGARY
POLAND
UKRAINE
CZECH
SLOVAKIA
Bratislava
LEASE LENGTH
Term
Leases are typically for 35 years, sometimes up to ten years, with fxed rents and predetermined annual indexations.
Renewal
Termination
An option to terminate is negotiable, and may provide for a penalty if exercised.
SPACE MEASUREMENT
The standard for measurement of gross lettable and net lettable areas varies depending on the developer. Both the
BOMA and German GIF Guidelines are among the accepted standards of measurement, however, internal measure-
ment of carpetable area is accepted as well. Landlords most often quote on a gross lettable area basis, although they
sometimes quote the net lettable area instead of or in addition to.
Defnitions
Carpetable Area: Area available for offce use, excluding toilets.
Net Lettable Area: Measures from internal wall to internal wall, includes toilets, but excludes columns and verti-
cal penetrations. The net lettable area is typically about 4% greater than the carpetable area.
Gross Lettable Area: Includes net lettable area, plus add-on factor (typically 510% for a Class A building
in Bratislava) plus common areas such as toilets and corridors shared by more than one tenant, which is not
included in add-on factor.
OCCUPANCY COSTS
Rent
Rent Quoted: Headline rents are quoted in EUR/sqm/month.
SLOVAKIA
Bratislava
+421 2 3255 3300
CBRE OFFICES
Rent Payable: Quarterly or monthly in advance.
Free Rent: Negotiable. Free rent is typically up to one month free for each year of the lease.
Included in Rent: The landlord usually pays for external and structural repairs.
Rent Escalation: Leases generally provide for an annual escalation, normally based on the HICP (Harmonised
Index of Consumer Prices) index. Fixed rent increases can sometimes be agreed to and stipulated in the lease.
Service Charge
Also called operating costs, this is the tenants proportionate contribution of the cost of maintaining common areas
and services. The service charge covers:
Operating, maintaining, cleaning and repairs of lighting, air conditioning, plumbing, drainage, sewerage, fre
prevention, elevators and telecommunication systems in the building, electricity in common areas, building
security, etc.
Property Tax: The landlord pays the tax and recovers it via service charges.
Building and Property Insurance.
A typical service charge in a Class A building in Bratislava is around EUR 3.504.50 per square meter per month.
Service charges are usually on an open-book basis and recalculated annually according to actual cost.
Taxes
Property Tax: The landlord pays the property tax and recovers it via service charges.
Value Added Tax (VAT): Slovakia has a fat VAT rate of 19%, which will increase to 20% starting January 1, 2011.
Utilities
Electricity and Air Conditioning: Electricity in the leased area is usually metered. The tenant pays for actual
consumption, generally including electricity for air conditioning or air-cooling. It is sometimes included as part of
the service charge.
Telephone Lines: The landlord provides telephone lines through its switchboards or the telecom supplier provides
them. The tenant pays either the landlord or supplier according to usage.
Telecommunication Charges: The tenant usually must arrange and pay for telecom services directly with
suppliers.
Landlord Work: The landlord usually provides a standard ft-out including carpeting, suspended ceilings, ceiling
lighting, raised foors, perimeter trunking, etc. Inclusion of interior partitions is included. If both parties agree,
the landlord may provide above-standard ft-out work, and the tenant pays the additional cost up-front.
Tenant Work: The landlord usually allows the tenant to do ft-out using the tenants architects, engineers, and
contractors. The lease contract usually specifes that the landlord may not unreasonably withhold its approval of
the tenants ft-out.
Tenant Work Cost: Fit-out costs for Class A or Prime buildings in Bratislava normally range from EUR 150300
per sqm including construction, furniture, wiring, design fees, etc.
This is usually a cash deposit or a bank guarantee: typically three months rent for an established company, or six
months for a start-up company, plus service charge and VAT. A parent company guarantee is sometimes possible in
addition to or instead of.
Restoration
The tenant is usually allowed to vacate the premises in a condition of normal wear and tear, but this is negotiable.
The landlords of Class A buildings usually require restoration of ft-out by the tenant.
Insurance: The tenant pays directly for third-party insurance, insurance for rented premises and its contents.
Car Parking: Parking spaces are allocated based on a ratio, which ranges from one parking space per 35 sqm
of space leased in Bratislavas Periphery to one lot per 200 sqm of space leased in the city center. Tenants pay
extra for parking spaces, commonly EUR 40 per space in the periphery and EUR 120 per space in the city center.
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TRANSACTION COSTS
Agency Fees
New Leases and Renewals: Separate agents commonly represent tenants and landlords, and each party pays
its agent or agents a negotiable fee, typically 815% of the average annual rent, depending on the value of the
lease. If the agent represents a tenant on a new lease or renewal, the fee can include a fxed part plus cost-
saving part. The cost saving is calculated as the difference between costs in the landlords offer and the costs
in the fnal deal. Reputable real estate agents take fees from both the landlord and the tenant only if agreed by
both landlord and tenant.
Subleases: The sublandlord pays its agent a fee. The fee for subleases is typically the same as with direct leases.
Legal Fees: The landlords solicitors normally prepare the lease agreement. Each party pays its lawyers fees.
No stamp duty applies.
Right to Sublet
Subleasing is normally allowed, subject to the landlords reasonable written consent, sometimes with restrictions.
Option to Expand
Options to expand and the right of frst refusal are negotiable.
Penalties for late delivery vary widely, are negotiable, and are specifed in the lease. Typically, tenants can negotiate
for the landlord to pay double the rent for late delivery.
Holdover by Tenant
Typically, the tenant pays two times the daily rent for holding over after lease expiration, as specifed in the lease.
The major tenant in a building generally has naming or signage rights if the building provides such a right.
General
Bratislava, as the business and political capital of the country, has Slovakias most developed real estate markets in all
sectors. Offce markets in regional cities are becoming more developed, mainly in Kosice, the largest city in Eastern
Slovakia.
It is not common for an offce occupier to own the building. There are few cases where the occupier owns the building
or a portion of the building and subleases it further, but this is rare.
Transparency
Data is generally available for recent transactions in Bratislava, including tenant names, square meters, rents and
incentives. Transparency outside of Bratislava is still limited, due to the limited size of other real estate markets.
This system of classifcation applies throughout Slovakia, although almost all Class A buildings are located in major
cities.
Class A
Hard criteria: All hard criteria must be met:
- Modern cable management either raised foors, suspended ceiling, suspended ceiling with fexible pole,
simple provision for under-foor cabling, compartment trunking.
Slovakia
- Modern air handling system including VAV, 4-pipe fan coil, 2-pipe fan coil and cooler beam system.
- Secure dedicated parking CBD 1:100, central 1:75, non central and periphery 1:50.
- High-quality standard fnish.
- 24-hour access and security.
Soft criteria: Five of the seven soft criteria must be met:
- High-speed modern lifts.
- Clear ceiling height of at least 2.65 m.
- Prestige building with high-quality reception area.
- Quality fnish to work areas.
- Flexible partitioning or moveable walls.
- Double-glazed windows or anti-glare glass.
- Services in the building or immediate vicinity: e.g., restaurant, shops, post offces, dry cleaners.
Class B
Similar standard of design and fnish as for Class A.
Reduced services.
Partial air handling system.
Quality of building design and materials inferior to those of Class A.
Ratio of underground or surface dedicated car parking lower than for Class A.
Class C
Generally un-refurbished, Soviet-era buildings.
CB Richard Ellis, Slovakia
Joerg Kreindl
Managing Director
+421 2 3255 3302
joerg.kreindl@cbre.com
Jana Kovov
Researcher
+421 2 3255 3329
jana.kovacova@cbre.com
About CBRE Slovakia: http://www.cbre.sk/sk_en
Slovakia
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SPAIN
Madrid
+34 91 598 1900
Barcelona
+34 93 444 7700
Malaga
+34 952 070 710
Marbella
+34 95 276 5130
Palma de Mallorca
+34 971 45 67 68
Valencia
+34 96 316 2890
Zaragoza
+34 97 648 4635
LEASE LENGTH
Term
For spaces under 1500 sqm: A three-year obligatory period for the tenant and the landlord, plus a two-year
renewal option for the tenant is typical and negotiable.
For spaces over 1500 sqm: A three- or fve-year obligatory period plus a three-year renewal option for the
tenant is typical and negotiable.
Termination
The right to end the lease early is rare.
Renewal
Options to renew are very common. Almost 90% of the leases signed in the Madrid and Barcelona markets have an
option to renew, which is normally linked with a rent review to market.
SPACE MEASUREMENT
Total Lettable Area
The quoted area is known as total lettable or superfcie bruta alquilable. In Spain, this includes gross area, including
walls and windows as well as common areas, corridors, toilets and common areas of the building such as lobbies.
Elevators, stairways and vertical shafts are excluded from measurement.
In the lease contract, a clause may say superfcie alquilada como cuerpo cierto, which means that both parties accept
measurement. This is equivalent to rentable area in the U.S.
This total lettable area represents about a 2030% increase over net areas, known in Spain as superfcie til or
superfcie neta utilizable (net area or net internal area in Europe; net usable area in U.S.), which is area measured
from the internal side of walls. It includes columns, fan coils and toilets if they are inside the premises and for the
private use of the tenant.
Effciency
A typical ratio of net area to total lettable area in a Class A building in Madrid is 7080%.
CBRE OFFICES
FRANCE
PORTUGAL
SPAIN
ANDORRA
Barcelona
Malaga
Palma de Mallorca
Valencia
Zaragoza
Marbella
Madrid
OCCUPANCY COSTS
Rent
Rent Quoted: Rents are quoted in EUR/sqm/month.
Rent Payable: Rent is paid monthly in advance.
Escalation: Rent normally escalates annually to CPI with open market review every 35 years. Normally, parties
agree to use the national CPI; however, sometimes parties agree to, and use, a provincial index or a lettings
index instead. The Instituto Nacional de Estadstica publishes these indices monthly on the Internet.
Free Rent and Other Incentives: Please see discussion of incentives below.
Service Charges
The tenant pays service charges separately from rent. In some cases, landlords also apply service charges to parking
spaces. Service charges include:
Building Management Fees: Management fees are usually 3% of the rental income.
Water charges are included in service charges.
Security, cleaning of common areas, maintenance and repair of installations, water consumption (based on
the area a tenant occupies, this is estimated at EUR 0.84/sqm/year), building insurance and civil responsibility
insurance.
In Madrid and Barcelona, service charges for a Class A buildings range from EUR 45/sqm/month and up to
EUR 7/sqm/month in some modern high-rise buildings.
Taxes
VAT is 18% of rent and service charges, and is recoverable in certain circumstances.
Municipal Property Taxes: In over 50% of cases, the landlord adds this tax, the IBI, to service charges (average
EUR 0.901.20/sqm/month in Madrid and EUR 0.801.00/sqm/month in Barcelona) for a Class A building. The
tenant pays increases if agreed in the lease contract.
An annual rubbish collection charge is applicable in Madrid, but this is included in the municipal property tax.
In Madrid, the town council invoices the landlord, but authorizes this to be recovered from tenants. The cost is
approximately EUR 1.92/sqm/year.
Utilities
The following utilities are paid by the tenant in addition to service charges:
Electricity: Tenants electricity consumption is metered and payable directly to the electricity company. The cost is
estimated at EUR 1.552.75/sqm/year.
Air Conditioning:
- In most modern buildings (built in the last 710 years) the air conditioning equipment is separate for each
tenant, and so the electricity to operate it is billed directly to the tenant.
- Older offce buildings generally provide centralized air conditioning to all tenants. Air conditioning costs are
divided among the tenants according to the amount of space each occupies. Tenants in these buildings pay air
conditining costs in the service charges.
Cleaning: Tenants individually contract the cleaning of their offce space, although the landlord may offer this
service and charge separately. In many offce towers the landlord obliges the tenant to use a specifed cleaning
service for security reasons.
Fit-Out
Landlords typically provide suspended ceilings, ceiling lighting, raised foor and restrooms. The landlord may provide
power cabling and distribution trays. Carpet, blinds, and other improvements are sometimes negotiable as incen-
tives, although rent-free periods are more commonly used as incentives.
The tenant usually performs the ft-out, with tenants contractors and construction workers, supervized by the land-
lords architects and engineers. The landlord may charge fees for supervision, and must approve all construction.
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Fit-out costs for Class A or Prime buildings in major cities normally range from EUR 350750 per sqm including
construction, furniture, wiring, design fees, etc.
Restoration
The lease normally includes a dilapidation clause, which requires that the premises be restored to their original
condition, allowing for normal wear and tear. The landlord normally grants a minimum time for the tenant to remove
an installation. Sometimes the landlord chooses to keep the installation.
Legal Deposit:
- The law requires that the tenant pay a deposit, equivalent to two months of the frst years rent, into an account
of the Chamber of Property Instituto de la Vivienda de Madrid, known as IVIMA, which is a state-run entity.
- For existing space, the tenant pays at contract signing. For space under construction and not immediately
available, parties sign a pre-contract, and the tenant is usually asked for a deposit in excess of the two months
rent stipulated by law.
- During the lease term, a deposit can be reviewed and adjusted according to CPI changes. Deposits are
normally adjusted for a renewal; i.e., after third or ffth year, although by law a deposit is reviewed after a
fve-year lease term. The landlord returns the deposit without interest at lease end if the premise is accordingly
reinstated.
Bank Guarantee: Landlords always require a bank guarantee in addition to a deposit. The bank guarantee can
be equivalent to 612 months rent during the lease term.
Car Parking
Parking costs are normally covered in a lease contract and paid separately from rent. The average provision for
parking is about one car space per 100 sqm of offce space in the city center, and one car space per 50 sqm of offce
space in out-of-town locations. Fees for parking spaces range from EUR 90200 per space per month.
Repairs and Insurance Cost: The landlord pays for structural and external repairs. For multi-tenanted buildings,
the landlord recovers repair and insurance costs from the tenant as a part of the service charges if stipulated in
the lease. If not specifed, or if a building has only one tenant, the landlord can recover a maximum of 12.5% of
the cost annually, up to a maximum of 20% of the rent.
Additional civil responsibility insurance may be required depending on the nature of the tenants activity.
TRANSACTION COSTS
Agency Fees
New Lease: Whoever hires the agent generally pays the agent. The landlord typically pays its agent 1215% of
the frst years rent. The tenant typically pays its agent a standard fee of 1215% of the frst years rent, although
the tenant and agent sometimes agree to a different fee structure based on savings.
Lease Renewal: The tenant pays 810% or pays according to an agreed fee formula based on savings.
Sublease: The tenant (i.e., the sublandlord) normally hires an agent and pays the same fees that a landlord
would pay when a standard lease is signed. Alternatively, parties can agree on a fee based on savings.
Sale or Sale and Leaseback: The party hiring the agent generally pays 3% on deals up to EUR 15 million and
1.52% on deals over EUR 15 million.
Additional Fees if Lease is a Public Title Deed: When parties sign a lease as a private contract, no taxes other
than 18% VAT are charged. Lease contracts can become a public title deed if signed in front of a public notary
and written in the public real estate register. However, this is very rarely done due to the additional cost involved,
even though it reinforces the status of the lease, and protects the tenant against eviction by a third party. Public
title means additional costs in 2010: Notary and registry fees, around 0.51.0% each, and Stamp Duty Tax
which, in 2009, was 0.51.5%, depending upon total amount of business. Because Spanish lease laws protect
tenants in their peaceful use of premises, public titles are unpopular due to added costs. However, tenants with
Spain
leases of 15 years or longer are more likely to formalize a lease before a public notary, for protection, particu-
larly with changing ownership.
Building licenses and licenses to commence economic activity account for 45% of the cost of ft-out.
General
A law concerning property leases, Ley de Arrendamientos Urbanos, covers offce leases.
Standard lease agreements with typical clauses exist. Terms and conditions of leases must not confict with Law
29/1994 (the Ley de Arrendamiento Urbanos) or with the Civil Code. However, the starting point will normally be a
contract supplied by the landlord, which will be modifed according to the wishes of the relevant parties.
Right to Sublet
Subleasing and assignment to a third party are rare, due to short lease terms.
Option to Expand
Negotiable. Options to expand or reserve space normally have a cost.
Depending on the negotiating power of the tenant, right of frst refusal options can be included in the lease, at no
additional cost.
The terms of release and penalty payments can be included in the lease document or negotiated when and if the
landlord fails to deliver on time.
The Civil Code contains guidelines for late delivery. Court decisions support such claims. The tenant is sometimes
released from the lease contract and paid double the amount that is paid in advance. A tenant can sometimes get
damages.
Holdover by Tenant
Penalties can be in the lease, or determined after holdover, and may be decided in court. The Civil Code considers a
tenant to have held over if the tenant fails to vacate within 15 days following lease expiration.
The tenant incurs payment of rents lost and possibly damages to the landlord for loss of a tenant. It is standard for
a clause in the lease contract to state that the tenant must pay 23 times the daily rent for each day the tenant holds
over.
External signs on faades may be prohibited by landlords or by municipality rules. Large cities like Madrid have
stricter rules in the city center than outside. Signs are normally only allowed at ground foor level. Small signs on doors
are allowed. Names on rooftops require permits, and the landlord is likely to charge a fee.
General
In the 2009 economic downturn, landlords became more creative in order to attract new tenants:
Landlords increased the rent-free period. In 2009, one months free rent for each year the tenant is bound by
contract became common, and in late 2010, this was still generally the standard. However, free rent can be
much greater in decentralized areas. Transparency is lacking in this area.
Landlords now offer attractive stepped rents more frequently. CPI increases apply, if agreed, in addition to step
rents. Open market rent reviews apply after the set period ends.
Some landlords provide ft-out allowances. Fit-out allowances are not common, but are increasing.
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Transparency
Leasing contracts are confdential, but brokers and consultants keep records of transactions. In Madrid and Barcelona,
the major property consultants exchange details of completed transactions (tenant names, addresses, rentals, incen-
tives), and make this information available to brokers and clients, respecting confdentiality where required.
No standard way exists to classify buildings by quality. However, buildings are classifed by use.
High-Tech Buildings: The term high-tech refers to offce buildings where occupancy is limited to occupiers
related to production, normally manufacturing. However, this restriction is vague. High-tech buildings do not dif-
fer physically from exclusive offce buildings, but are located in semi-industrial areas (or areas formally industrial
based).
Mixed Buildings: Normally offce use is limited to the ground and frst foors. Offce users share services with
the residential areas, so some services are limited. Mixed buildings do not normally have 24-hour security, air
conditioning in common areas, regular cleaning of facade, etc.
Exclusive Offce Buildings: These buildings are used exclusively for offces, but a change of use may be possible.
CB Richard Ellis, Spain
Alfonso Galobart Marone
+34 91 514 3840
alfonso.galobart@cbre.com
About CBRE Spain: http://www.cbre.es/es_en
For Local Market Reports: http://www.cbre.es/es_en/research
Spain
SWEDEN
Gothenburg
+46 8 4101 8700
Stockholm
+46 8 4101 8700
SWEDEN
RUSSIA
RUSSIA
FINLAND
BELARUS
POLAND
NORWAY
NETH.
LITHUANIA
LATVIA
GERMANY
ESTONIA
DENMARK
Gothenburg
Stockholm
LEASE LENGTH
Term
Three- or fve- year lease terms are typical in Sweden. Three years is generally the minimum, although large occupiers
often sign longer leases. Landlords normally require a 5-year lease or longer if they do extensive tenant improvements.
Termination
When the lease period is fxed, either landlord or tenant must give notice of termination to terminate the lease.
Otherwise, the lease automatically extends, normally for a new 3-year term. In general, notice of termination has to
be given 9 months prior to the exit of the lease period but can differ from contract to contract.
SPACE MEASUREMENT
Net Useable Area
Net useable area is generally the accepted standard, measured from the inside of exterior walls.
Effciency
A typical ratio of carpetable area to quoted area in a Class A building in Stockholm is 100%.
OCCUPANCY COSTS
Rent
Rent Quoted: Rent is usually quoted in Sweden Kronor (SEK) per square meter per year. The currency of Sweden
is the krona (which means crown; plural kronor, abbreviated kr or SEK).
Rent Payable: The tenant pays rent monthly or quarterly in advance. Most commonly, the tenant pays rent on a
net basis, i.e., excluding the operating costs and excluding service charges.
Free Rent: In Stockholm, rent-free periods of 06 months are common, depending on standard, location and
lease length.
CBRE OFFICES
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Rent Escalation: Although negotiable, rent is usually linked to annual changes in the national consumer price
index (CPI), published at www.scb.se, announced in October each year.
Operating Costs and Service Charges
Operating Costs: The tenant typically pays for operating costs in addition to the rent. Operating costs usually
include heating and cooling charges of approximately SEK 100150/sqm/year for a Class A building.
A service charge normally applies only if a service is provided, such as a common reception for the tenants.
Taxes
Property Taxes: The landlord collects the property taxes along with, and in addition to, the rent and forwards the
taxes to the national government. The average property tax for Class A buildings in the CBD is in the range of
SEK 350450/sqm/year in Stockholm and SEK 100200/sqm/year in Gothenburg.
Value Added Tax (VAT): Leasing of property is exempt from VAT. However, a landlord may choose to register
the premises (not the entire building) for VAT purposes if the tenant is liable for VAT. In this situation, the owner
charges VAT on rent and may offset it against VAT paid by the owner on maintenance, repairs, etc. The standard
rate for VAT is 25%.
Utilities
Utilities: The tenant pays the landlord for electricity, either based on an estimate, normally reviewed once a year,
or with a signed agreement directly with the electric company.
Water: Free for normal offce consumption.
Fit-Out
The landlord usually provides suspended ceilings, ceiling lighting and restrooms as a part of the lease agreement,
and typically makes some tenant improvements, which are negotiable. Fit-out costs are high in Sweden, and most
Scandinavian countries, due to high construction costs and high standards.
Fit-out costs for Class A or Prime buildings can range from SEK 50007000/sqm including construction, furniture,
wiring, design fees, etc. In central Stockholm, the landlord usually performs interior construction.
Restoration
The tenant must always return the property to its original condition minus any normal wear and tear unless the ten-
ants subsequent improvements are usable for future tenants, in which case the landlord is free to choose to allow the
improvements to remain. If the tenant does not fulfll this, the landlord can claim damages.
The deposit is typically six months rent or a bank guarantee. The amount depends on the tenants fnancial strength.
Large multi-national companies, major law frms, major consulting companies and state owned companies pay little
or no deposit.
Car Parking
The tenant pays for car parking separately. In Stockholm, CBD parking costs about SEK 3,500/month + VAT.
The landlord is responsible for structural repairs and building insurance.
TRANSACTION COSTS
Agency Fees for Leasing
New Lease: The landlord pays its agent 1015% on the frst years rent. If a separate agent represents the tenant,
the tenant pays its agent approximately 15% of the frst years rent but with a minimum fee.
Lease Renewal: The agency fee that the tenant pays is based on savings.
Sublease: The sublessor pays approximately 15% of the frst years rent, regardless of lease length, + VAT. If
separate brokers represent the sublessor and subtenant, each party pays its broker 1015%.
Sweden
Standard Lease Forms
There are no standard leases but the Swedish Property Federation has upheld contract forms.
Right to Sublet
Subleasing the entire premises is subject to landlord approval, although the tenant always has a right to sublet part
of the space.
Option to Expand
An option to expand or reduce in size is negotiable.
A rent discount is the most common practice, as established by law. Generally, costs incurred by late delivery are
reimbursable.
Holdover by Tenant
The law establishes penalties to cover the landlords costs.
Building Security
Building security is seldom an issue in Sweden. The landlord usually provides code locks as a part of the lease
agreement.
Signs on buildings require a building permit, which is normally not diffcult to obtain.
The naming of a building is unusual, and occurs only on landmark buildings. In Sweden, a landmark building is a
well-known building; which is often large with spectacular architecture, such as the Turning Torso building in Malm,
in southern Sweden.
Transparency
Comparables, which include names of tenants, space, and rents are in most cases available for recent transactions,
especially for Stockholm. Data on incentives, however, is not generally available.
Although no commonly accepted way to classify offce buildings exists in Sweden, CB Richard Ellis has classifed all
offce buildings in the Stockholm CBD as Grade A, Grade B or Grade C. CBREs classifcation considers a buildings
age, quality of systems and fnishes, effciency, etc.
CB Richard Ellis, Sweden
Pernilla Arnrud Melin
Head of Research
+46 8 4101 8708
Pernilla.Arnrud@cbre.com
Gurmo Endale
Research
+46 8 4101 8734
Gurmo.Endale@cbre.com
About CBRE Sweden: www.cbre.se
For Local Market Reports: http://www.cbre.se/se_sv/research/report_results
Sweden
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LEASE LENGTH
Tenants of all sizes normally lease for fve years, with an option to renew for a further term of fve years at a pre-
negotiated rent. Break options after three years have started to become more common (against a penalty); however,
the bulk of the lease contracts still have fxed lease terms of fve years. Only leases with a fve-year duration or more
may be fully indexed.
SPACE MEASUREMENT
Gross Internal Square Meters
The area is usually in gross internal square meters, which includes space that can be occupied, areas of non-load-
bearing inner walls, and restrooms. It excludes staircases, elevators and shafts. On multi-tenant foors, restrooms and
other common areas are allocated proportionally to the tenants on the foor.
This measurement practice follows the norms outlined in document SIA 416, published by the Swiss Society of
Architects and Engineers. Parties are not legally required to follow these measurement norms, and so measurement
practices vary appreciably.
Effciency
A typical ratio of carpetable area to gross internal area is 70%.
OCCUPANCY COSTS
Rent
Rental Quoted: Rent is quoted net of service charges and property tax in Swiss francs (CHF) per square meter
per year.
Rent is payable monthly or quarterly in advance. Rent is subject to VAT (8% in 2011) if the property is subject to
VAT. The landlord can recover the VAT on service charges.
Free Rent: No typical amount is yet established; however one to three months are possible, depending on the
location and the economic environment. The amount of free rent is negotiable. When major ft-out work is to be
done, the landlord usually gives a rent holiday for that time.
FRANCE
SWITZERLAND
FRANCE
ITALY
GERMANY
AUSTRIA
LIECH.
Geneva
Zurich
SWITZERLAND
CB Richard Ellis
PI Performance
Geneva
+41 22 322 8060
CB Richard Ellis
PI Performance
Zurich
+41 44 226 3000
AFFILIATE OFFICES
Rent Escalation: Rent is indexed to the consumer price index (approximately 1% per year on average); other rent
increase schemes like stepped rents are negotiable.
Costs Included in the Rent:
- Building insurance.
- Property taxes, although most Cantons do not levy property taxes.
- Structural repairs.
- Improvements: The landlord usually pays for improvements required by building authorities, such as sprinklers
for large premises of open space.
- Sometimes property management fees.
Service Charges
Typical service charges cover electricity in common areas, heating, water and sewage, waste disposal, environmental
maintenance, caretakers and building security. The landlord bills these in addition to the rent to the tenant, mostly
based on actual consumption.
Most landlords recover property management expenses partly or fully from their tenants with service charges.
The landlord returns any surplus to the tenant. The tenant pays the landlord any shortfall. The tenant has the right to
audit the service charges annually.
Taxes
The landlord pays any property taxes, which are not subject to VAT. However, most Swiss Cantons do not levy property
taxes. Zurich has no property tax. Genevas property tax is 2%.
Utilities
Tenants usually pay for electricity directly to an electric company based on a meter.
Tenants pay for water to the landlord via the service charges, based on the area occupied. The landlord usually has
the right to install a separate meter for excessive water use.
Fit-Out
The landlord normally delivers space in an improved shell and core standard with cable channels, heating,
blinds, restrooms and toilets. More modern buildings are also delivered with suspended ceilings, raised foors
and basic cooling and ventilation. The tenant normally pays for the remainder of ft-out. In 2010, some landlords
contributed to the tenant ft-out to attract tenants.
The tenant usually uses its own architects or space planners. For larger offce premises or in development
projects, the tenant sometimes uses the landlords architect. The landlord must approve ft-out work. Local
authorities may require approval for improvements such as windows, bearing walls, and ceilings. Fire depart-
ment inspection and approval are required.
Fit-out costs for Class A or Prime buildings in major cities normally range from CHF 1,500 to 2,500 per sqm
Restoration
The landlord usually requires the tenant to restore the premises at the end of the lease, especially if the tenant
provided the ft-out. Various solutions are negotiable.
Upon signing the agreement, the tenant normally provides three to six months security, either as a cash deposit
to a blocked (i.e., escrow) bank account or as a bank guarantee (i.e., letter of credit). The amount of the security
deposit is negotiable and depends on the fnancial strength of the tenant. A major company that provides a corporate
guarantee sometimes provides no security deposit or provides a bank guarantee. The landlord returns the security
deposit at lease expiration. The landlord has the right to keep a part or all of the security deposit to cover damages
or outstanding payments.
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Car Parking
The tenant pays extra for parking, as allocated in the leasing contract. Typical monthly charges for covered park-
ing lots are as follows: in central Zurich: CHF 300550; in the suburbs: CHF 150200; in central Geneva: CHF
550750; in the suburbs: CHF 200250.
There are normally no other signifcant occupancy costs.
TRANSACTION COSTS
Agency Fees
New Lease: Either the tenant or the landlord, whoever contracted the agent, pays 15% of the annual rent plus
VAT (8% in 2011) of annual rent, regardless of lease length. If one agent represents the landlord and another
represents the tenant, each receives 15% of the annual rental plus VAT.
Lease Renewal: The tenant pays 7.5%12.5% of the annual rent plus VAT (8% in 2011).
Sublease: The sublandlord or subtenant pays 15% of the annual rent, regardless of lease length, plus VAT (8% in
2011). If one agent represents the sublandlord and another represents the subtenant, each agent receives 15% of
the annual rental plus VAT.
There are no taxes for the closing of lease agreements.
Legal fees are generally paid by the parties.
Stamp duty and registration fees do not apply. They only apply in sales transactions.
General
The Swiss Law of Obligations (Art. 253 ff. OR) governs offce leases.
Standard leases are not frequently used by major landlords; however, leases usually do not differ greatly. Standard
leases are available from the Swiss Home Owners Organization (HEV), but only small landlords and small sublessors
use them.
Right to Sublet
Subleasing and assignment are legally authorized but require landlord consent. It is rare for a landlord to deny
consent to sublet because Swiss law does not allow the landlord to deny consent unreasonably. Denial is allowed
when there is risk of insolvency or change of use that would affect property.
Option to Expand
An option to expand is usually offered by the landlord with terms as set forth in the lease contract.
Terms are negotiable and often included in the lease contract.
Holdover by Tenant
Tenant holdover after lease expiration is not a problem in Switzerland; and therefore is not covered in lease contracts.
Building Security
Costs for building security are negotiable and can be a part of the service charges.
Buildings do not have tenant names in Switzerland. Local building regulations may limit front and roof signage. It
is diffcult to get approval for large or distracting signs on buildings that are listed in the local inventory of historic
buildings or buildings in protected zones.
Switzerland
There is no commonly accepted way to classify offce buildings in Switzerland by grade.
Transparency
Real estate agents rarely disclose terms of completed deals. A few cities such as Zurich, Geneva, Berne, Basel, and
Lausanne survey vacancy rates in offce, retail, industrial and residential sectors.
PURCHASE AND SALES
In Switzerland, offce occupiers either own or lease buildings. Larger companies usually hold some of their premises
in owned properties, whereas small-and medium-sized offce occupiers typically lease their space. International
occupiers usually lease before owning buildings or space in condominiums. However, several foreign companies own
buildings, especially headquarters buildings.
Transaction Taxes on Sales
Depending on Cantonal jurisdiction of the 26 Cantons, transaction taxes generally range from 0.7%5% of the sales
price. The transaction tax is 0% in the Canton of Zurich and 3.5% in Geneva.
Notary Fee on Sales Transactions
All sale transactions must be notarized. Notary fees range from 0.25% in Zurich to 0.5% of the sales price in Geneva,
and up to 0.75% elsewhere.
CB Richard Ellis PI Performance, Switzerland
David Schoch
Associate Director (Zurich)
+41 44 226 30 09
schoch@cbre.ch
Nicole Weber
+41 22 322 80 67
weber@cbre.ch
About CBRE Switzerland: http://www.cbre.ch/
Switzerland
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TURKEY
CB Richard Ellis
International Property Consultants
Istanbul
+90 212 259 3629
LEASE LENGTH
Typical Term
Lease terms are negotiable but tend to be for three to fve years.
Right to Renew
Typically, the lease contract grants a tenant the right to renew unless the owner requires the premises for its own use.
This right is negotiable, and not covered by law.
Right to Terminate
Typically, the lease contract grants a tenant the right to terminate the lease after one years tenancy with three months
prior written notice.
SPACE MEASUREMENT
Gross Area
Quoted areas are usually on a gross basis, which includes bathrooms, common areas, stairwells, and elevators.
Space is measured to the outside wall.
OCCUPANCY COSTS
Rent
Net Rental: The tenant pays net rental (i.e., excluding service charges and taxes) in U.S. dollars or in Euros.
Rent Payable: Tenants often pay rent monthly or quarterly, but practices vary. The tenant rarely pays rent upfront
annually. VAT is payable at 18% or withholding tax at 20% is payable on rent.
Free Rent: Some owners agree to a rent-free period, usually 13 months.
Rent Escalation: Rent either is subject to an annual percentage increase, usually 35%, or adjusts to a variable
such as the U.S. Consumer Price Index (CPI), subject to negotiation as specifed in the agreement.
AFFILIATE OFFICE
BULGARIA
TURKEY
GREECE
CYPRUS
SYRIA
IRAQ
GEORGIA
RUSSIA
LEBANON
IRAN
ARMENIA
AZERBAIJAN
AZERBAIJAN
Istanbul
Costs Included in Rent:
- Property Taxes: The landlord pays property taxes.
- Car Parking: In Istanbul, tenants usually get one car parking space free of charge for every 100 sqm of Class
A space leased. Most of the new developments offer one car parking space free of charge for every 50 sqm.
- Building Insurance: Not normally recovered from tenant.
- External Repairs: Not normally recovered from tenant.
- Repairs to Common Areas: Can be recovered from the tenant.
Service Charge
The tenant pays the service charge, typically USD 60120/sqm/year for a Class A Building.
Taxes
If a corporation owns the property, the tenant pays VAT at 18% of the rent.
If the property is owned privately, the tenant pays a withholding tax of 20% of the rent.
Service charge is subject to 18% VAT.
Utilities
The tenant generally pays for electricity and water, typically USD 68/sqm/year. Utility charges are mostly based on
a meter, paid directly to the utility companies, and are rarely included in the service charge.
Fit-Out
New properties lease on a shell-and-core basis with the tenant being responsible for ft-out expenses and for internal
repairs. Previously occupied space is typically leased as-is.
Landlords do not provide tenant improvements.
Fit-out costs for Class A or Prime buildings in major cities normally range from USD 450600/sqm including con-
struction, furniture, wiring, design fees, etc.
Restoration
Tenants are not required to restore the premises at the end of the term.
Usually, no rental deposit is required for shell-and-core space. Fitted-out premises often require a deposit equivalent
to two months rent. The deposits can be cash or letter of credit from a bank.
The tenant pays to insure the premises.
TRANSACTION COSTS
Agency Fees
New Lease: The tenant pays a total fee of 12% of the frst years rent, regardless of lease length. This fee is
not negotiable. Landlords do not pay fees, except when the offce building is Grade A+ and the landlord is a
company. Most landlords are individuals, not companies, and are personally liable in any lawsuits. VAT (18%) is
additional.
Lease Renewal: Negotiable, usually the tenant pays 8% of the frst years rent. If an agent represents the land-
lord, which is unusual, each party pays its agent.
Rent Review: The tenant typically pays 10% of the frst years rent, subject to negotiation.
Sublease: The sublessor or subtenant generally pays 1014% of the frst years rent, regardless of lease length,
subject to negotiation, plus 18% VAT. Subleasing is rare in Turkey.
Registration and Stamp Duty
- Registration of a lease is optional. Some tenants want registration because registration protects the tenant
from eviction if a property is sold. Lease contracts are registered at the Title Deed Offce.
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- The stamp duty is 1.65 per thousand (typically in either USD or EUR) of the total rent payable in the lease over
the term, as agreed in the contract. Either party may pay the stamp duty or they may share it, as agreed.
General
The Court and Execution Offces of the relevant city in Turkey handles disputes arising from the application of the
agreement.
When provisions not written within the agreement are required, 6570 numbered Law regarding the Rents of
Immovables, Code of Obligations, Civil Code, and 634 numbered Property Law and other relevant legislation are
applied.
Standard leases are not used. Lease agreements are drafted for each transaction.
Right to Sublet
Subleasing is rare in Turkey, is negotiable and subject to the landlords consent.
Option to Expand
An option to expand in accordance with availability is negotiable and can be addressed in the lease document.
A right of frst refusal is usually granted.
Contracts do not typically provide for penalties if a landlord delivers the space later than agreed.
Holdover by Tenant
There are penalty clauses in lease agreements that require the tenant to pay if the tenant does not vacate at the end
of the lease term. These clauses are negotiable.
Naming of a building and signage on a building are possible if a tenant leases the whole building.
General
Offce occupiers mostly lease space, rather than own.
Transparency
Comparables, which identify names of tenants, area, rental rates, etc., are generally available for recent transactions
in Istanbul, but generally not elsewhere in Turkey.
Grade A: These buildings have good-quality air conditioning, fre fghting and sprinkler systems, generators, water
supply, minimum two emergency staircases, good security, stringent seismic codes, elevators, garage car parking, etc.
CB Richard Ellis International Property Consultants, Turkey
Sedef Aslan
Head of Offce Agency
+90 212 259 3629 ext.19
sedef.aslan@cbre.com.tr
About CBRE Turkey: http://www.cbre.com/tr
Turkey
UKRAINE
Kyiv
+38 044 390 0000
BELARUS
RUSSSIA
RUSSIA
Kyiv
ROMANIA
BULGARIA
POLAND
M
O
L
D
O
V
A
UKRAINE
LEASE LENGTH
Term
The lease term in professional offce buildings (i.e., offce buildings built to modern standard and specifcations, typi-
cally by professional developers) varies from three to seven years, depending on the size of the occupier and quality
of the building. Ten-year leases are rare in the volatile 20092010 market.
Lease terms in non-professional offce stock are mostly short-term. Non-professional offce stock includes converted
apartments, industrial loft open space without an offce lobby, old Soviet-era administrative buildings, etc. Non-
professional offce stock is usually owned and operated by occasional owners, rather than offce developers, and
generally lacks proper facility management
Information that follows in this chapter refers to professional offce stock only.
Termination
Tenants have a statutory right to terminate only for force-majeure or company termination. Company termination can
include bankruptcy, administration (i.e., termination by court decision, etc.), merger, or closing for other reasons.
Leases sometimes provide for early lease termination in these cases, with a penalty. The penalty is typically 13
months with local landlords, and may be up to the entire remaining rent with international developers.
Renewal
A preemptive statutory right to renew the lease is provided by Civil Code, unless otherwise agreed between the parties
in the lease.
SPACE MEASUREMENT
Rentable Area
Parties are free to use either BOMA Method or BTI (Bureau of Technical Inventory) standards.
Most professional landlords use the BOMA measurement methods. Where BOMA methods are used, a common area
factor between 515% is widely accepted.
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Municipal governments and a few landlords use BTI. This includes all areas of a building where a foot can be set,
including staircases. BTI excludes other common areas such as lobbies and lift halls. Common corridors are included
only with single-occupier properties.
Effciency
A typical ratio of carpetable area to rentable area in a Class A building in Kyiv is 8590%.
OCCUPANCY COSTS
Rent
Currency: Rent has been historically quoted in leases in U.S. dollars, payable in Ukrainian Hryvnia (UAH).
However, landlords sometimes request euro-denominated rents. Rent can be denominated and quoted in Euros
or dollars, and is paid in UAH at the exchange rate at the time of payment.
Triple Net: Rents are typically quoted triple net, with 20% VAT added to all costs.
Rent Payable: The tenant pays rent monthly or quarterly.
Free Rent: Rent-free periods in 2010 ranged from 24 months, depending on lease length and landlords
contribution to tenants ft-out.
Rent Escalation: It is becoming common to escalate USD-denominated rental payments by 3% per annum.
Index-linked escalation is not widespread.
Costs Included in Rent: The landlord pays for capital improvements and structural repairs.
Service Charges
The service charge for a Class A building in Kyiv varies between USD 4.506.00/sqm/month, which covers:
Typical Operating and Maintenance Expenses: The tenant pays on a pro-rata basis.
Land Tax: In case of freehold (i.e., ownership).
Ground Rent Payable: Tenant compensates pro rata for the cost of land (either land rental payments in case of
leasehold, or only land tax in case of freehold).
Building Security: Normal building security is included in the service charge.
Insurance Premiums: For landlords third-party liability and physical building risks insurance.
Taxes
Value Added Tax (VAT): Twenty percent VAT is payable on all occupancy charges including utilities, telecom charges
and car parking. VAT exemptions are extremely rare and are limited to those few diplomatic missions that are
organized VAT exemptions.
Utilities
Electricity and Water: The tenant pays for metered electricity and metered water consumption separately from
the service charge.
Telecommunication Charges: The tenant usually arranges with, and pays, telecom suppliers directly.
Fit-Out
The tenant pays for all internal partitioning, re-decoration and the individual tenants wiring. Typical condition of
premises on handover is a standard ft-out, which includes perimeter wall fnish, suspended ceilings, lighting, and
carpeting. Additional needed ft-out costs for Class A or Prime buildings in major cities normally range from USD
150300 per sqm including construction, wiring, design fees, etc. The tenant typically pays these. Furniture costs
generally vary from USD 150300, additionally.
Restoration
Tenants rarely have to restore the premises. The landlord usually accepts it with normal wear and tear.
Ukraine
Three months rent or a bank guarantee is typical; however, for leases shorter than three years, landlords typically
accept 12 months security deposit. These amounts normally apply for tenants of all kinds including strong credit
tenants and start-up companies.
Car Parking
The tenant pays for secured parking in addition to the rent: typically USD 100200 per month, depending on the
location and whether it is a garage or surface parking space. Parking spaces are allocated according to a parking
ratio. Buildings usually offer one space per 100200 sqm in the CBD, one per 100150 sqm in secondary central
locations and one per 75100 sqm in non-central areas. Parking is extremely scarce in densely built Kyiv, and typical
parking ratios are noticeably worse in Kyiv than in Europes other major markets. Most tenants park along the street
and on sidewalks. Many employees use public transportation, and offce properties near the metro (subway) stations
attract many tenants.
No other signifcant occupancy costs apply.
TRANSACTION COSTS
Agency Fees
New Lease: Either the landlord or tenant pays 612% of the annual rent. The most typical fee is 8.3310% of an-
nual rent. When the landlord and tenant are represented by different brokers, each broker receives the amount
shown above from the represented side.
Lease Renewal: 612% of the annual rent.
The tenant pays legal fees if the tenant retains a lawyer for advice on the agreement. However, tenants often use
in-house lawyers to check the leases, and rarely outsource lawyers for lease reviews. Outside lawyers are normally
used only by large occupiers.
Leases over three years must be registered and stamped by a notary. The tenant pays the cost, which is usually below
1% of the lease value.
General
The Civil Code of Ukraine applies to all transactions, including lease of privately-owned property, that arise among
individuals, legal entities and state authorities. However, transactions for use and lease of municipal properties (state-
owned property) are governed by a special law which is called On Lease of State and Municipal Property.
Each building has its own lease that all tenants must sign. Provisions may vary from building to building (or landlord
to landlord).
Right to Sublet
Negotiable and normally addressed in the lease. No statutes apply.
Option to Expand
An option to expand is common and negotiable.
Late delivery is usually covered in pre-lease deals, where property is under construction or not yet commissioned. Late
delivery penalties are negotiable. One day of free rent against one day of delay is typical.
Holdover by Tenant
Most leases do not address holdover, although rights and penalties for holdover can be negotiated and addressed
in the lease.
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Signage and naming of a building are usually available. Signage is subject to the landlords approval. Outdoor or
faade signage is also subject to the citys approval. The tenant is responsible for obtaining all necessary approvals
and costs.
General
The Kyiv market has substantially matured in the past few years with respect to tenant and landlord relationships.
Institutional-quality leases are becoming widespread. An institutional-quality lease gives landlords the full guarantee
of rental income and requires the tenant to meet its rental obligations until the expiration of the lease term. These
leases, coupled with good construction, create institutional investment grade buildings.
Transparency
Almost all leases are confdential. However, data on offce completions, take-up and vacancy rates are shared on a
quarterly basis by some international brokerage frms without making such exchanges formal. CBRE plans to initiate
the establishment of a more formal Kyiv Research Forum.
In 20042005, the Real Estate Committee of the American Chamber of Commerce adopted a Standard Offce
Classifcation for Grade A, Grade B, and Grade C offce buildings in Kyiv. The Standard Offce Classifcation is used
by tenants and local developers and defnes Class A, B and C buildings, as follows:
Building Classes
Class A Offce Buildings: Must obtain all of the frst ten (imperative) specifcations and meet or exceed six out of
the additional (non-imperative) specifcations.
Class B Offce Buildings: Must obtain 13 of the specifcations of which a minimum of seven shall be of the frst
ten (imperative) specifcations.
Class C Offce Buildings: Must obtain seven of the specifcations of which a minimum of fve shall be of the frst
ten (imperative) specifcations.
Ten Imperative Specifcations:
1. Located within CBD (central business district as indicated by red line in the map below) or in a high profle
location close to a transport hub in its submarket.
2. Professional property management with a transparent and open book service charge expense, apportion-
ment and recovery system.
3. Dedicated and identifable offce entrance and lobby.
4. Clear net ceiling height not less than 2.7m across a minimum of 90% of the net useable area.
5. Dedicated secure parking (excluding on-street parking) within or adjacent to building not less than one car
place per 100 sqm of rentable area.
6. Power supply of at least 50 watts per one sqm of lettable area after lighting and plant supplied either by
Category I power supply or back-up diesel generator.
7. HVAC: At least 2-pipe (one circuit) HVAC system with individual tenants temperature control and fresh air
intake of not less than four changes per hour to offce space.
8. Column spacing with a fexible layout.
9. Fiber optic-based digital telephone, ISDN, and Internet technology services available within the building.
10. Chargeable loss factor not higher than 12%.
Additional Specifcations, Non-Imperative:
11. Frontage (visible frontal position on the address street).
12. Rational window spacing with not less than 95% of useable space within ten meters of natural light source
(i.e., window or atrium).
13. Minimum foor size of 500 sqm.
14. Average foor depth not exceeding ten meters from perimeter wall to end of useable space.
Ukraine
15. Flexible communication services including either raised foors, under-foor trunking or perimeter trunking.
16. Average elevator waiting time at peak use times of not longer than 30 seconds (after call)
17. Reasonable walking distance to nearest metro station or trolleybus stop.
18. Staff cafeteria (canteen) inside, or within a short walking distance of an affordable caf or restaurant.
19. 450 kg per sqm foor load-bearing capacity.
20. 400+ lux illumination of offce areas at working height.
21. Transparency
22. Offce data on completions, take-up and vacancy rates are shared on a quarterly basis by some interna-
tional brokerage frms without making such exchange formal. CBRE plans to initiate the establishment of a
more formal Kyiv Research Forum.
PURCHASE AND SALES
Occupiers above 5000 sqm tend to buy and own large premises.
Antimonopoly Clearance
Despite complicated rules that allow exceptions, anti-monopoly clearance typically is required for all asset or share
deals involving asset values of more than EUR 1,000,000 and sellers or buyers global turnover of more than EUR
7,000,000 for the full previous calendar year. Clearance typically takes 68 weeks after fling, with fling preparation
also taking 24 weeks. Solicitors fees for the process average around EUR 10,00015,000 per fling.
Acquisition Costs for Asset Trades
For asset trades (i.e., purchase and sales of real estate, of company shares, of corporate rights, etc.), a 1% notary fee
and 1% pension fund fee are payable. All other fees are nominal.
VAT and Capital Gains Taxes on Sales
Generally, VAT at 20% applies for real estate sale and leases. This VAT should be recoverable by law by a VAT-
registered payer, but in practice is typically offset against rental income. 5% for a private resident and 25% for a
company also becomes payable for a Ukrainian seller at asset disposal. If the seller of a Ukrainian real estate asset
is foreign, 15% Ukrainian Withholding Tax would apply to income received by such a seller in the absence of a
permanent establishment of such a seller in Ukraine. Otherwise, the foreign seller conducting business in Ukraine
through its permanent establishment would be liable to 25% tax in Ukraine.
CB Richard Ellis, Ukraine
Radomyr Tsurkan
Managing Partner
+38 44 390 0000
radomyr.tsurkan@cbre.com
About CBRE Ukraine: http://www.cbre.ua/ua_en
Ukraine
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UNITED ARAB EMIRATES
Abu Dhabi
+971 2 681 4399
Dubai
+971 4 437 7200
UNITED ARAB
EMIRATES
SAUDI ARABIA
QATAR
OMAN
IRAN
OMAN
Dubai
Abu Dhabi
LEASE LENGTH
Term
Typical lease terms are short, between one and fve years. Traditionally, most leases were for one year, but with the
recent consolidation of the offce market, landlords increasingly understand the benefts of locking tenants into longer
leases to secure steady income streams.
In some instances, tenants are now seeking to commit to leases of between fve to seven years, frequently with a
tenant-only right to break at the end of the ffth year. Occasionally, tenants are now even committing to 10-year
leases.
Break
Tenant-only rights to break are becoming more common in the market, particularly in longer leases; for example, at
the end of the third year of a fve-year lease, or at the end of the ffth year of a seven-year lease.
Landlords are offering rent-free periods spread out across the term of the lease, so that tenants that terminate before
lease-end do not beneft from these incentives.
Renewal
Under Federal law, if a tenant continues to occupy the premises after the lease expiration without any objection from
the landlord, then the lease shall be deemed renewed for a similar period on the same terms and conditions. Under
Dubai law, if either the landlord or the tenant wishes to amend the terms of a lease on renewal, it must notify the other
party not less than 90 days prior to lease expiration.
SPACE MEASUREMENT
Floor areas are usually quoted in square feet, but in Abu Dhabi, area is quoted in square meters.
No single standard of area calculation is used in the UAE. However, the RICS Code of Measuring Practice is increas-
ingly recognized, and foor areas now tend to be stated as a net internal or gross internal area.
CBRE OFFICES
Defnitions
Net Internal Area: Net internal area is the normal measurement used to describe the area that a tenant occupies
within an offce building. Increasingly, the measurement is performed under the guidelines of the RICS Code of
Measuring Practices, although some landlords include the internal columns within a tenants proposed demise.
Gross Internal Area: Typically, when quoting the area of a whole foor, the space measurement is the gross
internal area according to the RICS Code. However, where a tenant chooses to occupy a foor or series of
foors in a building, the landlord will often try to include pantries and toilet facilities, and quote a gross internal
measurement.
OCCUPANCY COSTS
Rent
Rent Quoted: Rental rates in the UAE tend to be quoted in terms of AED/sq ft, except for Abu Dhabi where
rents are quoted as AED/sqm. AED is the currency abbreviation for United Arab Emirates dirham. The dirham is
subdivided into 100 fls.
Gross or Net: Depending on the landlord, rental rates are either quoted gross (i.e., including service charge)
or net (i.e., with a separate, transparent or not transparent, service charge cost). The present market does not
generally use reconcilable service charges, so that the true cost of running the building is diffcult to assess,
causing landlords to gravitate towards gross rental rates.
Rent Payable: Typically, the tenant pays rent bi-annually or quarterly in advance in the form of two or four post-
dated checks given at the start of the year.
Free Rent: Depending on the size of tenure and individual landlord, 16 months rent-free can be negotiated.
Landlords sometimes also offer free car parking spaces included in the rent.
Rent Escalation
Abu Dhabi: The amended law allows landlords in Abu Dhabi to increase rents once a year by not more than
fve percent. The timing of rent review depends on the date of the last rent review. Under the revised law, the
landlord has no right to require the tenant to vacate the leased property except after four years. Specifcally,
the four-year period is identifed as: Leases entered into before November 9, 2006 (being the date the Law in
its initial form came into force); calculated from the most recent anniversary of the start date of the lease; and
leases entered into on or after November 9, 2006, calculated from the date of the lease.
Dubai Permitted Rental Increases for Residential and Commercial Properties in 2010:
- If 2009 rent is 025% below the rent index level: the permitted increase is 0%.
- If 2009 rent is over 56% below the rent index level: the permitted increase is 20%.
Sharjah: Rents cannot increase for the frst three years of a tenancy contract (Rules are currently under review by
a special committee).
Ajman: Maximum 20% increase after three years of the tenancy contract.
Ras Al Khaimah: 5% for tenancy contracts signed after January 2008, 10% rent cap for contracts signed be-
tween January 2004 and January 2008, 15% rent cap for contracts signed before January 2004.
Fujairah: Introduction of a rent cap is likely.
Umm Al Quwain: Maximum increase of 10%, but landlord and tenant are permitted to reach an alternative
agreement.
Service Charges
The tenant pays service charges on multi-let property to cover items such as building management, security, cleaning
and general upkeep and repair of premises. Service charges may or may not provide for a sinking fund to replace
large capital items such as lifts (elevators). Insurance can be included in the service charge or charged separately.
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Service charges range from 1540 AED/sq. ft./year.
Taxes
Municipality Tax: Although the UAE enjoys a relatively tax-free environment, a Dubai tenant pays a Municipality
Tax of 5% on annual rental.
Value Added Tax (VAT): VAT is not applicable in 2010.
Utilities
In most instances, service charges do not cover water, electricity or sewerage, for which tenant pays separately and
directly to the provider either by meter or as a unit rate directly to the landlord. Sometimes, there is also a separate
charge for chilled water.
Electricity is based on metered consumption. Depending on the consumption, it ranges between 20 fls to 33 fls/kWh.
A fls is 1/100 of a dirham (AED).
Water charge is based on metered consumption. Depending on the consumption, it ranges between 3 fls to 4 fls/
gallon.
Sewerage charges are applied based on water consumption.
Fit-Out
Landlord Work: No set standard exists in UAE. Typically, restrooms, prayer rooms, and pantries are considered
part of the shell. Ceiling, integral lighting, and raised access foor are at the discretion of the landlord. Many
developments are fnished to a shell and core standard only, although some landlords now provide a raised
foor, and in isolated instances there are landlords offering premises in Cat A condition. Cat A condition means
in handover or fnished condition.
Tenant Work: Tenants usually are responsible for ft-out and are permitted to use their own architects, engineers,
and contractors, subject to landlord approval. The landlords mechanical and electrical engineers typically
review plans and specifcations.
Typical ft-out costs for Class A or Prime buildings in major cities from shell and core, including construction,
furniture, wiring, design fees, etc., are:
- Open plan: AED 1,8003,600 per sqm. Open plan can be defned as desks in an open area or systems
workstations in an open area.
- Mixed: AED 2,7004,500 per sqm.
- Cellular: 4,5006,400 per sqm. A cellular layout is a layout with a high ratio of closed offces compared with
an open plan layout.
Restoration
The lease describes a tenants obligations. Usually the tenant must restore the premises to its original state on oc-
cupancy, but this is negotiable. Generally, a tenant will have improved the premises, but any redecoration or damage
must be made good, usually with a cash payment or a deduction from the security deposit. Occasionally, parties
agree in the lease that certain improvements can remain.
Landlords require a security deposit (13 months annual rent) from a tenant to pay for any damages at the end of the
term and this is paid at the time of lease signing. The deposit is normally stored in an interest-bearing account under
the names of the tenant but in the control of the landlord and held until lease expiration.
Car Parking
Charges for car parking spaces depend on the lease. Some leases include car parking spaces while others require a
separate rent for any available spaces. Abu Dhabi and Dubai Municipality regulations state that any building pres-
ently under construction must provide for one parking space per 500 sq. ft. of net internal area, a trend also being
followed in other Emirates.
Not applicable for property leasing.
TRANSACTION COSTS
Agency Fees
Tenants typically pay agency fees, which range from 510% of the frst years rent.
Legal Fees: The tenant and landlord pay their respective solicitors a fee separately, depending on the amount of
work. No fxed structure exists for calculation of legal fees.
Key Money: If a tenant takes over an existing lease as an assignment or sublease, it sometimes pays a premium
refecting the value of the lease or pays key money to the landlord to secure a tenancy, although this practice is
becoming less evident.
No other signifcant costs typically apply.
General
Memorandum of Understanding or Heads of Terms: The party that drafts the lease, typically the landlord,
prepares a non-binding document called a Memorandum of Understanding or Heads of Terms, which is compa-
rable to a Letter of Intent or Term Sheet in the U.S. It outlines the basic terms of the lease. Tenant and landlord
can negotiate terms in the Memorandum of Understanding after which it is translated into the lease.
Agreement of Lease and Lease:
- For new buildings, the landlord and tenant normally execute two binding documents: an Agreement for Lease
and the Lease. The Agreement for Lease remains in place until the tenant occupies the space. Upon posses-
sion, the Lease supersedes the Agreement (i.e., landlord delivers fnished building). In some instances, both
documents are concluded simultaneously.
- For space in existing buildings, there is no Agreement of Lease.
Arbitration: If the landlord and tenant cannot agree on an open market rental value, they can put forward the
dispute to a Special Judicial Committee for Settlement of Disputes between Landlords and Tenants, which is
tasked with introducing appropriate measures to implement provisions of the Decree. However, market practice
is for parties to come to an amicable decision rather than submit a dispute to the Committee, as the regulatory
framework is relatively undeveloped and contains signifcant ambiguity.
Law No. 20 of 2006 Amended: Recently, the Abu Dhabi Government signifcantly amended Law No. 20 of
2006, which governs the relations between the landlord and tenant. The amendment is named Law No. 6 of
2009. These changes are intended to give the tenant more security. If a dispute occurs normally the landlord
and tenant are represented by lawyers at a Committee hearing. Committee decisions are fnal and cannot be
appealed. In short, the amendment stipulates:
- Tenants have now secured tenure of occupation for four years (instead of three); and,
- The conditions attached to the rental dispute committees ability to terminate a lease before the lapse of the
secure term were changed. They are now that the tenant (1) is given prior notice of the requirement to vacate
the premises (of a maximum of six months), (2) has occupied the premises for at least two years (previously it
was one year); and (3) remaining in occupation would cause grave loss to the landlord.
Individual landlords generally will use their own lease form and in many instances insist that the lease is non-
negotiable and cannot be amended by the tenant.
Right to Sublet
The right to sublet is negotiable and subject to landlord consent. Typically, if the landlord agrees to a sublet, it is on
the same terms and conditions as the tenants lease terms and conditions.
Option to Expand
A right of frst refusal can occasionally be negotiated.
Typically, no penalties apply for late delivery of new buildings.
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Holdover by Tenant
No normal practice exists.
Signage and naming rights can occasionally be negotiated by larger occupiers.
Transparency
The commercial offce market in the UAE is still very immature by global standards, and so clear-cut standard market
practices are not yet fully developed.
Market information such as lease lengths, areas, and rents for recent transactions are generally unavailable to the
public. However, agents normally have access to details of specifc transactions for rent review and research purposes.
As in the U.S. and U.K., buildings are ranked using Grade A, B, and C. CBRE UAEs expectation at each level are:
Grade A
- Fully Accessible Raised Floors (min 150 mm).
- Suspended Ceiling (with Integrated Light Fittings).
- Electricity to Suit LG3 lighting (Integrated into Ceiling).
- Proactive Building Management.
- Flexibility of Floor Plate.
- High Speed and Well Maintained Lifts and Goods Lift.
Grade B
- Fully Accessible Raised Floors (min 150 mm).
- Perimeter/Under-Floor Trunking.
- Electricity to Suit LG3 lighting (Integrated into Ceiling).
- A/C Cassette System.
- Proactive Building Management.
- Flexibility of Floor Plate.
Grade C
- Perimeter/Under-Floor Trunking.
- Solid ceiling.
- Electricity to Suit Fluorescent Tube Lighting.
- A/C Cassette System.
Freezones
Freezones are locations where specifc companies may operate in a sheltered business environment to increase
investment in given markets. Companies in Freezones generally operate within laws of the countryexcept for the
Dubai International Financial Centre, which operates under its own lawsbut are exempt from some fnancial and
economic government regulations. The incentives offered range broadly depending on the specifc Freezone, al-
though typically include 100% ownership, 100% repatriation of capital, 0% income tax and subsidized rents or
operating costs.
The United Arab Emirates is currently home to over 25 Freezones operated under different business sectors. Due to
tax and investment benefts, occupiers often prefer to operate from these Freezones rather than on-shore.
CB Richard Ellis, United Arab Emirates
Matthew Green
Associate Directory Head of Research
+971 4 437 7200
matthew.green@cbre.com
About CBRE United Arab Emirates: http://www.cbre.eu/uaen
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UNITED KINGDOM
Aberdeen
+44 1224 219 000
Belfast
+44 28 9043 8555
Birmingham
+44 121 609 7666
Bristol
+44 117 943 5757
Edinburgh
+44 131 469 7666
Glasgow
+44 141 204 7666
Jersey
+44 1534 874 141
Leeds
+44 113 233 7666
Liverpool
+44 151 224 7666
London (City)
+44 207 182 2000
London (West End)
+44 207 182 2000
Manchester
+44 161 455 7666
Southampton
+44 23 8033 8811
IRELAND
UNITED
KINGDOM
Leeds
Manchester
Birmingham
London
Jersey
Bristol
Southampton
Liverpool
Belfast
Glasgow
Edinburgh
Aberdeen
LEASE LENGTH
Term
Leases in the United Kingdom are typically for longer terms than in continental Europe. Occupiers taking large
buildings commonly commit to leases for more than ten years. As supply diminishes and pre-letting activity increases,
lease lengths are tending to lengthen to 15 years or more. Shorter leases are available either on premium terms or
through serviced offces, i.e., business centers that offer fexible offce solutions. A tenant occupying 5000 sq. ft. of
space in a multi-tenanted building will normally sign a 10-year lease but with a break clause after fve years. Any less
than 5000 sq. ft. and this lease will revert to fve years with a three-year break option.
Break
Options are negotiable for tenants to break at specifed points in the tenancy, usually after three or fve years or both.
Renewal
Tenants can normally renew a lease on similar terms upon expiration by negotiation.
The Landlord & Tenant Act of 1954 (not applicable in Scotland) governs tenants rights and provides security of
tenure, by requiring compensation to tenants from landlords who refuse a tenants request to renew. However, parties
often agree to exclude the security of tenure provisions of the Landlord & Tenant Act, which thereby removes the
tenants right to renewal or compensation. The Act does not protect the tenant against rent increases for renewals,
however. The lease can link the renewal rent to infation with a cap or set renewal rents at the open market rate, based
on comparable evidence from other properties.
SPACE MEASUREMENT
Net Internal Area
Offce measurements are normally based on the net internal area, which is the usable area within a building mea-
sured to the internal face of the perimeter walls at each level, excluding walls, restrooms, elevators, common areas
and other areas that cannot be occupied by a desk.
Gross Area
Gross measurements mainly apply to industrial and retail space, rarely to offces.
CBRE OFFICES
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OCCUPANCY COSTS
Rent
Rents are quoted in United Kingdom pounds (GBP) however, per square foot per year, typically on a net basis;
i.e., excluding service charges, insurance, and property taxes. Rent for serviced offces normally includes these
charges.
Rent Payable: Rents are normally payable quarterly in advance.
Value Added Tax (VAT): VAT is payable on rent if the building is elected for VAT. The current rate is 17.5%, rising
to 20% starting January 2011.
Rent-Free Periods: Rent-free periods are negotiable and a common incentive to persuade tenants to sign a lease.
The value of the incentive offered depends on market conditions, the quality of the tenant taking the lease, and
the length of the term. Rent-free periods vary signifcantly, but in London, two to three months rent-free per year
for each year of a new lease is typical. Rent-free periods in 2010 have been as high as 2 years on a ten-year
lease. Elsewhere in the U.K., the average rent-free period in 2010 is just over two years on a ten-year lease but
has been as high as four years.
Rent Escalation: Rents are normally reviewed and adjusted to open market level every fve years, usually upward
only. Between reviews, the amount payable is fxed. Some commercial landlords offer tenants more choices of
lease terms and basis for rent review (i.e., infation-linked).
Estate Charge
Where the property forms part of a large estate, such as Canary Wharf, a tenant may be liable for estate charges,
which contribute toward the maintenance and operation of the estates common parts. The estate charge does not
form part of the service charge and is apportioned depending on the amount of space a tenant occupies on the
estate.
Service Charge
Tenants pay a service charge that usually covers:
Common costs of running the building, if multi-tenanted.
Proportional costs of structural and internal repairs as well as property tax.
Building insurance is usually, but not always included within the service charge.
Management Expenses: Two to four percent of annual rent is recoverable from a tenant as part of the service
charge in multi-let buildings.
Through a full repairing and insuring lease a new tenant may become liable for items of capital repair to the
building or replacement of a redundant plant, so tenants should exercise due diligence.
Taxes
Business Rates: (i.e., property taxes) are payable by tenants. The rates liability is calculated based on the rental
value at the time of the last rating revaluation multiplied by a standard ratable value multiplier that is agreed
upon annually. Business rates vary considerably but usually amount to 2030% of the rent.
VAT is always payable on ft-out costs and service charge. However, depending on the nature of a tenants
business it is sometimes possible to reclaim part or all of the VAT for the service charge.
Utilities
Electricity: The tenant pays for its actual consumption, based on metered usage directly to the utility company.
The cost of electricity used to run the building is included in the service charge.
Commonly, the cost of utilities such as water usage will be included as part of the service charge that a tenant
will pay unless they have a signifcant water usage.
Fit-Out
Landlord Work: The landlord typically delivers space with ceilings, lighting, mechanical and electrical, raised
foors and restrooms.
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Tenant Work: Tenant ft-out usually includes reconstruction of the ceiling, mechanical and electrical, lighting,
cabling and partitioning. Tenant ft-out generally needs the landlords consent and must be done with licensed
professionals, especially when moving or upgrading the landlords mechanical and electrical equipment.
Fit-out Costs: The tenant pays ft-out costs, although the landlord typically contributes with a rent-free period or
capital contribution toward carpets, foor boxes, etc. Tenant ft-out costs for Class A or Prime buildings in major
cities normally range from GBP 50150 per sq. ft. including construction, furniture, wiring, design fees, etc.
Restoration
A lease will usually contain covenants obligating the tenant to return the premises to the landlord on expiry in the
same condition as it was presented to the tenant at the start of the term. This will normally involve removing any ft
out partitioning as well as the furniture and redecorating or refurbishing as necessary.
If a tenant is unable to provide three years worth of accounts in which operating proft is at least three times the
annual rental liability, then the landlord may require a rental deposit of 612 months rent. The deposit is held in an
escrow account, and is to be returned after a tenant has fulflled all its obligations.
Car Parking
Car parking is usually included in the offce rent, particularly outside Central London. In Central London, and in some
major regional centers, tenants pay for car parking as additional rent, that can be GBP 25004000 per annum per
space.
TRANSACTION COSTS
Agency Fees
Each party normally appoints and pays its own representatives.
Disposal fees paid to agents representing landlords are typically 57.5% of the annual agreed rent, depending
on building size and the number of agents involved. The fees quoted are typical of market rates and are often
negotiable.
Acquisition fees are more variable but typically range from GBP 2.003.50 per sq. ft. These are again
negotiable.
Legal Fees: Legal fees are typically up to 5% of the annual rent.
Stamp Duty: Stamp Duty is payable by tenants on the acquisition of interests in land, both freehold and lease-
hold. Stamp Duty for a lease is currently 1% of the net present value, discounted at 3.5% of the rent payable
throughout the term of the lease, ignoring infation as measured by the Retail Price Index (RPI) or other rental
escalations included in the lease.
General
The principle law governing an offce lease is the amended Landlord and Tenant Act 1954.
The act provides security of tenure to a tenant and the right to apply for renewal of the tenancy.
It provides the right to compensation should the application for renewal be contested.
It limits the way in which a tenancy can be terminated to those specifcally set out within the Act.
Not all commercial tenancies fall within this act, namely those with shorter leases in multi-tenanted buildings. However,
those that do must comply with several strict notice procedures to maintain the protection of the Act.
No standard form of lease exists in the U.K., but market norms exist for most lease agreements.
United Kingdom
Right to Sublet
A tenant occupying an entire building, or part of it, has the right to sublet its offces in whole or part, or assign
in whole, although this right is restricted. A lease will, however, place restrictions on the total number of separate
occupancies within the building. These restrictions will be outlined in the original agreement between landlord and
original tenant.
Option to Expand
A right to expand within a lease is rare but negotiable. A right of frst refusal for other space within the building is
more common.
Where a building is not ready for occupation on the initial agreed date, the Agreement for Lease will usually specify
a clause stating what penalties the landlord will incur. In the case of a new building, it is rare for a lease to provide
for late delivery as the lease is often drawn up upon building completion.
Holdover by Tenant
Where a lease is protected by the Landlord & Tenant Act 1954, either party is entitled to initiate the procedure for
renewal within 12 months of the expiry and to then apply to the Courts to decide the terms of a new tenancy. Where
this process has not been initiated or is delayed, the tenant has a right to hold over and the landlord cannot secure
vacant possession unless the tenant decides to vacate or the Court agrees to the landlords opposition to renewal.
It is normal for a tenant occupying part of a building to have their name included in the buildings directory.
Where a tenant occupies the whole building, or a signifcant part of it (say 80%-plus), an agreement to have naming
rights will initially be written in to the Heads of Terms but will also be included in the Agreement for Lease and in
the lease as a binding agreement.
General
The party that drafts the lease, typically the landlord, prepares a non-binding document called a Heads of Terms,
comparable to a Letter of Intent or Term Sheet in the U.S., which outlines basic terms of the lease.
For new buildings, the landlord and the tenant normally execute two documents: an Agreement for Lease and a Lease.
The Agreement for Lease is in effect until the tenant occupies the space. Upon possession, the Lease supersedes the
Agreement for Lease.
Owner occupancy is less common than in most other parts of Europe for both foreign and domestic companies.
Transparency
No publicly accessible central register of property occupation or transactions exists, but CBRE and other real estate
companies collect and regularly publish market information on rents, capital values, and market conditions.
Financial information relating to major property companies and funds is widely available. Rents on new leases,
rent review settlements, and capital values are generally based on comparable evidence, which agents assemble
from similar recent transactions. These comparables take into account the tenants, building size and condition and
incentives.
No standard offce building classifcation exists; although the following specifcations are used:
Grade A is the best space available, usually brand new, or best secondhand space in good locations, with top
specifcation and prominent market image. New space is always classifed as Grade A space.
Grade B is good-quality secondhand space, no longer considered prime because of age, location, etc.
Grade C is poorer quality space, typically older and non-air conditioned with a lower standard of amenities and
services.
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CB Richard Ellis, United Kingdom
Kevin McCauley
Director - Research and Consulting
+ 44 207 182 3620
kevin.mccauley@cbre.com
About CBRE United Kingdom: http://www.cbre.co.uk/uk_en
For Local Market Reports: http://www.cbre.co.uk/uk_en/research
United Kingdom
Asia Pacifc
Australia .......................... 191
New Zealand .................... 195
China ............................... 199
Hong Kong ....................... 204
India ................................. 209
Japan ............................... 214
Malaysia ........................... 219
Philippines ........................ 223
Singapore ......................... 228
South Korea ...................... 231
Taiwan .............................. 236
Thailand ........................... 240
Vietnam ............................ 244
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CBRE OFFICES
Adelaide
+61 8 8110 3333
Brisbane
+61 7 3833 9833
Brisbane GCS
+61 7 3234 9100
Busselton
+61 8 9263 5800
Cairns
+61 7 4051 8922
Camden
+61 2 4655 8700
Canberra
+61 2 6232 2733
Chermside
+61 7 3359 7411
Gold Coast
+61 7 5581 2000
Ipswich
+61 7 3281 6688
Mandurah
+61 8 9586 4933
Melbourne
+61 3 8621 3333
Melbourne GCS
+61 3 8605 4500
Mulgrave
+61 3 8541 3333
Newcastle
+61 2 4926 6433
North Sydney
+61 2 9954 3333
Northern Beaches
+61 2 9939 6788
Parramatta
+61 2 9891 3330
Perth
+61 8 9320 0000
Perth GCS
+61 8 9322 1270
South Sydney
+61 2 9316 8611
South Yarra
+61 3 9863 5333
Sunshine Coast
+61 7 5457 5757
Sydney
+61 2 9333 3333
Sydney GCS
+61 2 9333 9033
Tweed Heads
+61 7 5536 2322
Underwood
+61 7 3340 4500
AUSTRALIA
AUSTRALIA
Cairns
Townsville
Northern
Beaches
Brisbane
Perth
Mandurah
Adelaide
Sydney
Melbourne
Milton
Liverpool
Ipswich
Mulgrave
Gold Coast
Chermside
Tweed Heads
Underwood
Mooloolaba
Parramatta
South Yarra
Newcastle
Canberra
LEASE LENGTH
Term
Three to ten years is typical, depending on building quality and tenant requirements. Longer leases are found in the
Canberra market and in buildings with a higher concentration of government tenants.
Option to Renew
Commercial occupiers generally have no automatic renewal rights unless parties agree to a formal option period.
However, renewal rights are generally not diffcult to negotiate, depending on market conditions. Options are nearly
always subject to a market rent review.
Option to Terminate
Early termination is negotiable but not common. Break clauses may be used by landlords with plans for refurbishment
or redevelopment.
SPACE MEASUREMENT
Net Lettable Area
Landlords lease foor space on a net internal basis (known locally as net lettable area). The Method of Measurement,
by the Property Council of Australia, is the industry standard.
When leasing a full foor, space is measured from the dominant surface on the inside of the perimeter wall, including
internal columns. Excluded are toilets, services ducts, stairways, tech rooms (as installed by landlord), lifts and space
between lifts if they face each other.
When leasing part of a foor, space measured is area enclosed by tenancy walls.
Effciency
A typical ratio of carpetable area to net lettable area in a Class A building in Sydney is 9798%.
OCCUPANCY COSTS
Rent
Rent Quoted Net or Gross: Landlords quote rents in Australian dollars (AUD) per square meter per annum. In
most cases, rental rates are advertised plus GST. Rents are quoted on either a net or a gross basis. Net rent
excludes outgoings. Gross rent includes outgoings. Outgoings are operating costs + government charges. In
Sydney, rent is normally advertised as gross plus GST (goods and services tax) although North Shore rents are
quoted on a net basis.
Rent Payable: Tenants pay monthly in advance. When rents are quoted on a net basis, as they are in Sydney,
tenants still pay the outgoings in addition to the rent.
Rent Review: Rent reviews are common and usually occur once every two years, or annually, as negotiated.
They vary in how they are structured. Rents may increase by a fxed percentage, infation rate (CPI), or a market
review. Most rent reviews are upward only and do not allow rents to correct downwards.
Outgoings
Tenants pay landlords for their proportionate share on all outgoings expenses (operating, building security, building
insurance, and real estate taxes) for the building, except they do not pay for major structural repairs or structural
improvements. The taxes are known as statutory costs, as they are part of statutory law, whereas other outgoings are
based on costs to run the building.
The rate of outgoings varies by building and location. Outgoings in the heart of the Sydney CBD, near Circular Quay,
are about AUD 180/sqm/year for premium-grade buildings, and about AUD 160 /sqm/year for Grade A buildings.
Taxes
Goods & Services Tax: The tenant pays a 10% goods and services tax (GST) to the Australian Government on all
costs.
Utilities
Electricity is metered directly by the supply authority and the tenant is billed directly by the authority.
Water is normally billed to the landlord and may be recovered in the outgoings; however, it is becoming more
common in new buildings (and with large tenants) to be metered and billed directly, particularly for excess
usage.
Fit-Out
Landlord Work: Landlords typically supply suspended ceilings, light fttings, carpeting and painted walls, and
sometimes curtains or Venetian blinds, and ducted cable skirting boards with power points. Partitions may
remain from the previous tenancy.
Tenant Work: The tenant usually undertakes ft-out for the remaining items. The ft-out must comply with the
Building Code of Australia and be approved by the landlord and by the local government building authority. The
tenant normally chooses its architects, engineers and contractors.
Fit-out Costs: Fit-out costs for Class A or Prime buildings in major cities normally range from AUD 9002500/
sqm, including construction, furniture, wiring, design fees, etc.
Restoration
Restoration (Make Good): Tenants generally must restore a property to its original base building condition, taking into
account fair wear and tear. This is negotiable.
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A typical guarantee is equivalent to three to twelve months gross rent, either as a bank guarantee or rental deposit.
An owner that grants a large incentive may require a larger guarantee in the early stages of the lease to cover the
upfront incentive. A guarantee from an overseas parent company is not always suffcient for a company without assets
in Australia and therefore a Bank Guarantee will be required.
Car Parking
Tenants pay for car parking separately, plus state government levy, plus GST. Car parking rents are typically adjusted
annually.
Cleaning of tenant areas usually costs extra; about AUD 1225/sqm/year in the Sydney CBD for all grades of
offce space.
Maintenance: The tenant is responsible for maintaining demised premises. The landlord maintains the balance
of the building and charges costs back to tenants with the exception of the cost of major structural repairs or
structural improvements.
TRANSACTION COSTS
Brokerage Fees
Landlords generally appoint and pay an agent to represent their interests. Most occupiers use and pay a property
consultant or broker to secure new premises.
Acquisition: Acquisition fees vary and may be based on a fxed rate per square meter, or may be equivalent to
one months rent, or may be based on an hourly rate. If a broker represents a tenant, the tenant pays a fee to
the broker.
Sublease, Assignment, or Surrender: Fees generally range from 11.515% of the average annual rent paid by
the disposing party. If a broker represents a tenant, the tenant usually pays its broker. However, if the landlord
pays the tenants broker, the tenants brokers fee is taken out of any tenant incentive.
Legal costs: Each party normally pays its own legal expenses.
Stamp Duty: The tenant pays the stamp duty that the state or territory government imposes on lease transactions
(not applicable in NSW & Victoria).
General
Real estate legislation varies in different states and territories. The Property Council of Australia (PCA) standardizes
base building defnitions and services requirements, such as lift frequencies.
Each lessor tends to have its own leases prepared by their lawyers; the majority of terms follow a similar format.
Assignment and Subletting
Tenants are normally allowed to assign or sublet space to another tenant of good standing upon written consent by
the landlord.
Option to Expand
A tenant may be able to negotiate a right of frst refusal or a fxed option to lease identifed space as part of a lease
negotiation.
Late Delivery by Landlord to Tenant
Typical penalties are in the form of free rent periods. This is negotiable.
Holdover by Tenant
Typical penalties are 1015% extra net rental.
Australia
Only large occupiers of space are offered naming or signage. These can attract additional rentals as negotiated at
the time.
General
Incentives are common and vary signifcantly from city to city, based on market conditions, strength of tenants credit
rating, length of lease, desirability of tenant, and amount of space leased. Incentives may include any of the follow-
ing: (1) Rent-Free Period: i.e., free rent at the start of the lease; (2) Rental Abatement: i.e., free rent that may be partial
every year; (3) Fit-Out Contribution; and (4) Relocation Contribution.
Transparency
Public information on lease transactions is limited and varies among states and territories. Real estate consultants
generally share this information. Good comparables are available for major markets such as Melbourne, Sydney,
Brisbane, Perth, Canberra and Adelaide.
Building grade classifcation is set out by the Property Council of Australia in their Guide to Offce Buildings Quality
and is determined by factors such as NLA, foor plate size, environmental, mechanical, tenant riser, lifts, electrical,
standby power base, building management, communications, hydraulic, security, amenity and parking features of
the building.
CB Richard Ellis, Australia
Peter Messenger
Senior Managing Director
+61 2 9333 9033
peter.messenger@cbre.com.au
About CBRE Australia: http://www.cbre.com.au/EN/
For Local Market Reports: http://www.cbre.com.au/EN/Research/
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NEW ZEALAND
CBRE OFFICES
Auckland
+64 9 355 3333
North Auckland
+64 9 984 3333
South Auckland
+64 9 573 3333
Christchurch
+64 3 374 9889
Hamilton
+64 7 850 3333
Wellington
+64 4 499 8899
NEW ZEALAND
Wellington
Christchurch
Auckland
Hamilton
LEASE LENGTH
A typical lease term is 69 years. Larger tenants typically lease for as long as 12 years. Smaller tenants may some-
times lease for only three years. Options to renew and terminate are negotiable.
SPACE MEASUREMENT
Net BOMA Standard
The standard method of space is the Net BOMA (Building Owners and Managers Association) Standard.
Effciency
A typical ratio of carpetable area to rentable area in a Class A building in Auckland is 90%.
OCCUPANCY COSTS
Rent
Recent Rental Rates: Please visit CBRE Global Knowledge Center: http://gkc3.cbre.com/search/search.aspx
Rent Quoted: Rent is quoted in New Zealand dollars (NZD) per square meter per year.
Rent Payable: The tenant pays rentals monthly in advance on either a net basis or a gross basis.
- Net Basis: This excludes all outgoings (service charges, council rates and land taxes), which the tenant pays.
Rent is quoted and paid on a net basis in Auckland and Christchurch. External and structural repairs are
included in the rent.
- Gross Basis: This includes all outgoings. This has been typical in Wellington, where deals on a net basis are
now becoming more common.
Free Rent: The tenant sometimes negotiates free rent to cover the ft-out period. In 2010, one and a half to two
months of free rent is typical for every year of the lease term. In 2009, one month of free rent was typical for
every year of the lease term. Free rent in 2008 was typically about one month for every two years of the lease
term.
Rent Escalation: Rent reviews are generally every two or three years, depending on the lease length (term).
Reviews based on CPI are becoming increasingly more common, especially for prime buildings, but market
rent reviews are still most common. There is often a modifed ratchet clause stating that rental, when reviewed,
cannot fall below the original rental fgure.
Outgoings Costs
Service Charge: This includes water rates, repair and maintenance to elevators, air conditioning, cleaning of
common areas, insurance, and common area electricity.
Land Tax: The only real estate tax is for council rates (land tax) as mentioned above. Council rates are annual
charges by the local council, which pays for local council services. The tenant usually pays its pro rata share
directly to the local authority, including any increases. Many leases exclude these from rent in Auckland but
include them in Wellington, where the landlord pays the increases.
Taxes
Tenants pay GST and rent at the same time. However, the tenant recovers GST costs later. The net result is that no
additional taxes are effectively paid.
Utilities
The tenant pays for its own electricity and water usage in its leased area.
Electricity: Generally, tenants pay for electricity used within their own space based on a meter, and a pro rata
share for usage by the building. It a tenants space has a meter, the tenant pays the electric company directly
for actual consumption. If a meter measures usage from multiple tenants, tenants share charges on a pro rata
basis, apportioned by the property manager, who collects the funds through the OPEX payments and then pays
the electricity company. For offce buildings, a typical cost for electricity is between NZD 25 and NZD 30 per
sqm/year.
Water: Tenants generally pay for water through their OPEX based on the area occupied. Water costs are be-
tween NZD 2.20 and NZD 4.40 per sqm/year.
Fit-Out
The landlord normally delivers the space with ceilings, lights and restrooms at its own cost. Fit-out costs for Class A or
Prime buildings in major cities normally range from NZD 9001200 per sqm including construction, furniture, wiring,
design fees, etc. The tenant normally pays for the initial ft-out, and sometimes the landlord contributes. Sometimes
the ft-out from the previous tenant remains. The tenant is usually free to choose its contractors, although design
restrictions may apply.
Restoration
When a tenant vacates, the lease may oblige it to make good (or repair) any damage done to the premises beyond
normal wear and tear. This also includes things such as removing any hard partitions put into the premises by the
tenant and repairing damage caused by their removal. However, this can be negotiable when a tenant is ready to
vacate, if the ft-out may be reusable.
A signifcant up-front payment is not commonly required in new buildings. However, an owner that provides a large
incentive may require a deposit or bank guarantee for 36 months gross rent. Guarantees by directors, partners, or
third parties (such as a bank or parent company) are often suffcient.
Cleaning of Tenants Premises: For all building grades, tenants normally pay for cleaning of the premises
separately from the service charge.
Car Parking
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TRANSACTION COSTS
Agency Fees
Fees for transactions outlined below apply when a single broker represents the landlord or sublandlord.
If separate brokers represent the landlord (or sublandlord or seller) and tenant (or subtenant or buyer), the fee split
varies with the situation. However, a full fee is never paid twice. Sometimes the landlord (or sublandlord, or seller)
pays a fee that is slightly higher than the fees outlined below (usually 1530% higher) to be shared between brokers
on a negotiated basis. Sometimes the tenant (or subtenant or buyer) pays its own broker at the rates shown above.
Typical fees are:
New Leases: Typical agency fees include an administration fee of NZD 500, plus:
- For leases up to three years: 12% of annual rental.
- For leases of three years and over: 13% of annual rental, increasing by 1% for each year after.
- A minimum fee for any transaction is NZD 2,500.
- For leases with an annual rental below NZD 100,000, the fee is two months gross rental.
Sublease: Agency fees are the same for new leases.
Lease Renewal: 510% of the total rent for the renewed term.
Lease Termination: Tenant typically pays between 5% and 10% of savings.
General
The Property Law Act of 2007 governs offce leases, and generally applies to every lease or sublease made on,
before, or after January 1, 2008. The Act is retrospective with some exceptions. If a lease omits issues included in this
Act, the Act will govern.
Two standard leases are frequently used:
Property Council of New Zealand Lease (PCNZ) or Building Owners and Managers Association (BOMA) are
generally used for the biggest premises. It favors landlords more than the ADSL lease, and can handle large and
complex tenancy issues.
Auckland District Law Society Lease (ADSL) third, fourth and ffth editions are used in 90% of leases. It fts
medium and smaller buildings and favors tenants more than the PCNZ lease.
Right to Sublet
Subletting is common, and requires landlord approval.
Option to Expand
This is negotiable.
There are no typical penalties.
Holdover by Tenant
No typical penalties exist.
Signage and naming costs vary depending on building size, profle, etc. Auckland CBD naming rights typically range
from NZD 50,000150,000 per year. Auckland CBD signage-only rights range from NZD 30,00090,000 per year.
New Zealand
General
A Letter of Intent is done before the fnal contract.
Transparency
For Auckland, comparables that identify tenants, square meters, and rents and incentives for recent transactions are
confdential, but some details are available from consultancies.
Buildings in New Zealand are classifed according to the criteria below:
Premium: Top-quality landmark space, which is generally the pace setter in establishing rents; prestigious lobby,
high architectural merit, prominent location, prestigious occupiers, the latest or recent generation of building
services, ample natural lighting, good views, quality access to and from an attractive street environment, large
size: 20,000 sqm.
Prime: Combination of Premium and Grade A.
Grade A: High-quality modern space with many, but not all, Premium features.
Grade B: Good-quality modern space with some Grade A features.
Secondary: Combination of Grade B and C.
Grade C: Average quality air-conditioned space, usually of 15+ years of age that has not undergone signifcant
refurbishment but is in a tidy condition.
Grade D: Older style, poor-quality space.
CB Richard Ellis, New Zealand
Zoltan Moricz, Director
+64 9 359 5399
zoltan.moricz@cbre.co.nz
About CBRE New Zealand: http://www.cbre.co.nz/EN/
For Local Market Reports: http://www.cbre.co.nz/EN/Research/
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CHINA
CBRE OFFICES
Beijing
+86 10 8588 0888
Chengdu
+86 28 8447 0022
Chongqing
+86 23 6310 7070
Dalian
+86 411 3980 5855
Guangzhou
+86 20 2883 9200
Hangzhou
+86 571 2880 6818
Qingdao
+86 532 6887 7222
Shanghai
+86 21 2401 1200
Shenyang
+86 24 2318 2688
Shenzhen
+86 755 8271 8999
Tianjin
+86 22 8319 2178
Wuhan
+86 27 8555 8277
LEASE LENGTH
Term
A standard lease term is two to three years. In some major cities like Beijing and Shanghai, large tenants take fve- to
six-year leases, subject to rent review after three years at open market rent (OMR), with the option to renew for three
more years, usually adjusted to OMR. If parties cannot agree on OMR, an arbitrator determines the new rent.
Termination
The right to terminate early is negotiable and is subject to the lease contract. The tenant may have to pay a penalty
if the tenant terminates early.
Renewal
Renewal options are negotiable and important for large tenants.
Holdover options are sometimes negotiated into the lease, depending on the level of the landlords sophistication,
and on the size and importance of the tenant. If included, landlords usually ask for 36 months prior notice to allow
a tenant to hold over for up to three additional months following expiry date.
SPACE MEASUREMENT
Net Area, Common Area, and Gross Area
Net area is space that tenants can use as offce space, including columns and walls, but not corridors, stairs, elevator
lobbies, restrooms or plant rooms. Net foor area is measured from the center of the enclosing external and party
walls. Net area is equivalent to carpetable area elsewhere.
Common area is space for the common use of tenants, such as lobbies, elevators, elevator hall, and restrooms. Some
buildings include parking spaces as common areas and provide tenants with free parking spaces according to the
space that tenants occupy.
Gross area equals net area plus common area. Gross area includes all areas contained within perimeter walls at
each foor level, including service cores, elevator lobbies, passenger and service elevator wells, staircases, lavatories,
pantries and mechanical and electrical rooms.
CHINA
RUSSIA
MONGOLIA
KAZAKHSTAN
KYRGYZSTAN
INDIA
NEPAL
BHUTAN
BANGLADESH
MYANMAR
THAILAND
VIETNAM
LAOS
PHILIPPINES
TAIWAN
JAPAN
SOUTH
KOREA
NORTH
KOREA
PAKISTAN
Dalian
Hong Kong
Guangzhou
Shenzhen
Hangzhou Chengdu
Chongqing
Shanghai
Wuhan
Tianjin
Qingdao
Beijing
Shenyang
Effciency
For Class A buildings in Shanghai, the average effciency (i.e., the ratio of net area to gross area) is 6576%, so that
an average loss factor is 2435%.
For a Class A building in Beijing, the average effciency is 7075%, so that a typical loss factor is 2530%.
OCCUPANCY COSTS
Defnitions
These defnitions apply to China only. The terms, net and gross, have different meanings in China than elsewhere.
Net Exclusive Rent: Rent based on net foor area excluding other occupancy costs such as management fees,
utility charges, real estate taxes, etc.
Gross Exclusive Rent: Rent based on gross foor area, excluding other occupancy costs, such as management
fees, utility charges, real estate taxes, etc.
Net Inclusive Rent: Equals net exclusive rent plus other occupational costs such as management fees, utility
charges, real estate taxes, etc.
Gross Inclusive Rent: Equals gross exclusive rent plus other occupational costs, such as management fees, utility
charges, real estate taxes, etc.
To convert net rent (which in China means rent based on net area) to gross rent (which in China means rent
based on gross area), multiply net rent by the buildings effciency rate.
Rent
Rental Rates: Generally, rental rates for large spaces and for well-fnanced multinational companies are lower
than for small spaces and for small companies. Rental rates for higher foors are typically higher than those for
lower foors.
Rent Quoted: Rent is generally quoted as gross exclusive rent per square meter, although landlords sometimes
quote gross inclusive rents. In both Shanghai and Beijing, rents are generally quoted in either RMB/sqm/day or
RMB/sqm/month.
Rent Payable: Rent is payable monthly, in advance. The tenant pays deposit, rent, and maintenance fees based
on either gross area or net area in square meters.
Free Rent during Fit-Out Period: The amount depends on the size of leased area. The average in Shanghai is
one to three months for a 2000-square-meter tenant.
Free Rent during Term: The amount is negotiable, and depends on factors such as size of leased area, length of
term, and face rental.
Rent Escalation: Rent is generally fxed during the entire term for leases of less than fve years. For longer-term
leases, rent sometimes escalates at an agreed rate.
Costs Included in Rent: The owner pays the property tax. Landlords of well-managed buildings insure their
buildings.
Service Charges
The tenant pays service charges (also known as management fee or management cost) to the landlord for providing
specifed services: air conditioning during normal offce hours, elevator maintenance, power back-up, and common
area cleaning, a general water charge unless the tenant installs an additional pantry, and building security.
The amount varies from building to building depending upon services provided and building quality. For a Class A
building, RMB 3550 per square meter per month on net area (RMB 2532 per square meter per month on gross
area) is typical in Shanghai and Beijing.
All tenants in a building typically pay a service charge at the same rate. Service charges are usually not auditable by
tenants.
Taxes
Lease taxes may vary geographically and change over time; they mainly include:
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Property Tax: (also known as urban real estate tax) levied on 12% of the annual rental income for rental proper-
ties, and payable annually by the owner.
Business Tax: along with its surcharges (including urban maintenance and construction tax and education tax,
up to 10% of business tax), are levied on 5.5% of gross rental income for the leasing of a property, and payable
annually by the owner.
Stamp Duty Tax: levied on 0.1% of the contract amount on both the tenant and the landlord.
Utilities
Electricity, water and telecommunications are normally monitored by separate meters. Tenants usually pay for electric-
ity and water used within the occupied area based on a meter. Expenses for utilities used in the common area of
the building are shared according to the area of each tenants unit. Charges vary in different areas of Beijing and
Shanghai. The tenant pays a utility fee directly to the landlord, which ranges from RMB 0.91.2 per square meter per
month.
Fit-out
Landlord Work: The landlord delivers premises installed for an open plan with: (1) fnished ceiling, i.e., suspend-
ed ceiling using acoustic ceiling tiles and ceiling lighting; (2) HVAC and fre systems; and (3) fnished restrooms
in core.
Tenant Work: Normally the tenant pays for the ft-out, with no allowance from the landlord. The tenant usually
must use contractors that the landlord appoints for mechanical and electrical systems, but can usually use its
own contractors for other work. Landlords sometimes charge fees for supervision, but this is negotiable.
Fit-out costs for Class A or Prime buildings in major cities normally range from RMB 100200 per sq. ft. includ-
ing construction, furniture, wiring, design fees, etc.
Restoration
The lease agreement usually requires tenants to restore the property to its original condition.
A three-month security deposit is normally payable upon signing of the agreement. The landlord returns the security
deposit with no interest at lease expiration. When the lease is extended for another three years, the amount of security
deposit is usually adjusted to OMR.
Car Parking
The tenant pays extra for parking, usually from the landlord who allocates available spaces.
Tenants typically insure their own property.
TRANSACTION COSTS
Agency Fees
Agency fees shown below are typical. They differ in some locations and may be negotiable.
New Lease: In Shanghai, landlords typically pay one month gross exclusive rent; sometimes more for larger
transactions. When different agents represent the landlord and tenant, landlords usually pay both agents.
Lease Renewal: In Shanghai, no standard fee exists for lease renewals, although landlords rarely pay agency
fees for a renewal. The tenant typically pays fat fees, a percentage of the monthly rental, or a percentage of
savings.
Sublease: In Shanghai, no standard fee exists. The tenant pays its agent a negotiated fee, which is typically one
months rent or a percentage of savings.
Additional Transaction Costs
Legal Fees: The landlords solicitors prepare a standard lease agreement, subject to negotiation by lawyers for
each party. Each party usually pays for any legal fees it incurs.
China
Stamp Duty: Each party pays the stamp duty and other incidentals involved in lease preparation and execution.
In Shanghai, Beijing and Guangzhou, the tenant pays 0.1% stamp duty for the leasing contract amount to a local
district real estate exchange centre.
General
The China government promulgated the Administration of the Leasing of Urban Premises Procedures in 1995 and
all urban leasing activities must comply with this regulation.
The owner usually provides a standard lease contract supplied by the municipal government. Further terms and
conditions of the lease are negotiable and can be attached to the contract.
Right to Sublet
Subleasing is somewhat uncommon, except when the subtenant is a subsidiary or affliated company of the tenant.
Documents verifying a subtenants qualifcation must be provided and approved by the landlord.
Options to Expand
Options to expand and right of frst refusal are possible for large occupiers.
Subject to the contract, the handover date is usually fxed and the tenant is entitled to claims for all losses upon the
late delivery by the landlord.
Holdover by Tenant
Subject to the contract, the termination date is usually fxed and can be negotiated within a period of time if the land-
lord consents. The contract clarifes the penalty for overdue termination, and the tenant is usually asked to indemnify
landlords for losses caused by delay in surrendering the space. Any disputes can be submitted to the municipal
arbitration commission or court of law.
Signage and naming rights may be available for an anchor tenant or a large property buyer, depending on negotia-
tion with the landlord and approval from relevant government authorities.
Grade A buildings offer access and security 24 hours a day, seven days a week. Normal HVAC hours are from 8am
to 7pm, with after-hours air-conditioning available at an additional charge.
General
Feng Shui: Some tenants consider feng shui, for their offce layout and decoration, but feng shui does not affect
the choice of a location or a choice of offce space.
Landlords usually avoid designating foors as 4
th
, 13
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th
, because some domestic or overseas tenants
consider these numbers unlucky. However, the designation of a foor is not a major infuence on the rental rate.
Letter of Intent: Parties usually sign a non-binding letter of intent prior to the execution of the fnal contract. In
Shanghai, landlords and developers usually require a non-refundable deposit equal to one months rent payable
upon execution of the letter of intent.
Transparency
Information on recent comparable transactions in major cities and elsewhere is not available to real estate agents
and their clients.
Grade A: Services such as cleaning of common areas, air conditioning, and lobby security are required, while tenants
are usually responsible for cleaning their own premises.
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Grade B: Services such as cleaning of common areas, air conditioning, and lobby security are required. The major
differences between Grades A and B buildings are the quality of these services as well as the building quality itself.
Some Grade C buildings may lack these services.
CB Richard Ellis, China
Danny Ma
Senior Director, CBRE Research, China
+86 21 2401 1317
danny.ma@cbre.com.cn
China
CBRE OFFICES
Hong Kong
+852 2820 2800
Kowloon
+852 2820 8100
HONG KONG
Hong Kong
Kowloon
HONG KONG
LEASE LENGTH
Term
A standard lease term is three years, but most large tenants take leases of six years subject to rent review after three
years at open market rent (OMR). If the parties cannot agree on OMR, an independent expert valuer determines the
rent.
Termination
Options to terminate are negotiable but rarely agreed to by the landlord.
Renewal
An option to renew is negotiable, especially with tenants that lease over 10,000 sq. ft. The rent for an option period
is normally adjusted to OMR.
SPACE MEASUREMENT
Defnitions
No single standard of area calculation applies in Hong Kong. Floor areas are usually quoted based on gross area,
lettable area, or net area. The foor size that the landlord quotes, and that the tenant pays for, is not negotiable.
Tenants generally should engage a designer to measure the foor area of the leased premises to ascertain a more
accurate assessment of usable foor area.
Space Measurement Terms are:
Gross Area: The total area measured to the outside of external walls, including elevator lobbies and wells,
restrooms, staircases and all mechanical areas.
Lettable Area: The net area, plus a percentage of common areas such as elevator lobbies and restrooms.
Common areas are apportioned if the foor is subdivided.
Net Area: The area measured from the inside walls of the premises, sometimes including columns.
Effciency: A percentage that represents a ratio of useable area to gross area (or lettable or net area), as illus-
trated in examples below. The term carpetable area is not familiar in Hong Kong.
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Effciency
A typical 10,000-sq. ft. gross foor plate will have approximately 8,500 sq. ft. lettable and approximately 7,500 sq.
ft. net usable square feet. A landlord can quote on a gross, lettable, or net area basis.
Gross Basis: If a landlord quotes rent on a gross basis, the tenant pays on a gross basis, but typically the tenant
can only use about 75% of the space it pays rent on. The effciency is 75% in this example. Effciencies range
from 6080% when the landlord quotes on a gross basis.
Lettable Basis: If the landlord quotes rent on a lettable basis, the tenant pays on that basis, but typically the
tenant can only use 85% of the space it pays rent on. The effciency is 85% in this example. Effciencies range
from 8093% when the landlord quotes on a lettable basis.
Net Basis: When landlords quote and tenants pay on a net basis, effciency is usually 100%, but it can range
from 95100%. This means a tenant can actually use 95100% of the space it pays for; up to 5% can be lost to
a lift lobby area.
OCCUPANCY COSTS
Rent
Currency: Hong Kong Dollars: HKD (or HK$).
Net Rent: The tenant pays the landlord base rent plus government tax plus service charges. The landlord then
pays the government tax to the government.
Rent Payable: Rent is payable monthly in advance in HKD.
Free Rent: Also called rent free. During tight market conditions, free rent offered may range from one to three
months. During weak market conditions, some landlords offer six free months or more, depending on the
tenant, the length of the lease term, or size of the space leased.
Rent Escalation: Rent is fxed during the lease term.
Service Charges
The tenant pays service charges to the landlord for specifed services, including building security, heating and air
conditioning during normal offce hours, elevator maintenance, power back-up and common area cleaning. These
are charged according to the amount of space occupied.
The service charge per square foot depends on services provided, quality of the building, and whether rent is based
on gross, lettable, or net measurements. A typical service charge for a Grade A building is HKD 610 per square
foot per month.
Taxes
Property Taxes: The tenant pays rates quarterly at 5% of the ratable value of property. The government assesses
such value annually.
VAT: Not applicable in Hong Kong.
Utilities
The tenant pays for electricity, water, and gas used in the premises, usually directly to the utility company.
The electricity charge is usually based on a meter, and is typically HKD 1.001.20 per square foot per month for an
offce tenant.
Tenants usually pay for water based on a meter, although some pay a fxed license fee or pay for water in the
management fee.
Fit-Out
Tenants normally pay for all tenant improvements, except that the landlord normally delivers the space with suspended
ceilings, ceiling lighting and restrooms (landlords standard handover condition).
In general, a tenant is free to use its own architect and engineers, and must use the landlords contractor for electrical
work and plumbing. The tenant must ft-out the premises according to plans and specifcations as approved in writing
by the landlord.
Hong Kong
Fit-out costs for Class A or Prime buildings in major cities normally range from HKD 4501200 per square foot,
For tenant-paid improvements at move-in and during occupancy, the landlord charges handling fees, typically 10% of
the price quoted by nominated contractors for carrying out electrical, plumbing, air conditioning, and fre prevention
maintenance work.
Ranges shown below include design and engineering fees but exclude furniture and IT cabling:
Average: HKD 250350 per square foot net (basic specifcations to suit-trading companies).
Enhanced: HDK 350450 per square foot net.
Law Firms: HKD 450800 per square foot net.
Very High-End: Some investment banks spend over HDK 850 per square foot net on renovation.
Restoration
The lease agreement generally requires tenants to restore the property to its original handover condition.
Car Parking
The average rate ranges from HKD 3,0006,800 per month in addition to offce rent. Terms and conditions are
covered in a separate license agreement, usually not coterminous with the tenancy agreement, so that the licensee
can rent a parking space for a shorter period than an offce lease. Parking spaces can be fxed (assigned) or foating
(non-assigned), covered or outdoor, 24 hours, seven days a week, or 8am to 6pm, Monday to Friday. Generally, up
to two spaces are allocated for a 10,000-square-foot offce.
TRANSACTION COSTS
Security Deposit
A three-month cash security deposit is normally payable upon signing the agreement. A start-up company may have
to pay up to six months deposit plus provide a parent company guarantee or personal guarantee from a company
director. Well-established companies can negotiate a bank guarantee to cover the usual three-month deposit.
The landlord returns the security deposit without interest at lease expiration. When parties extend a lease for another
three years, they usually adjust the amount to OMR.
Agency Fees
New Lease: The landlord usually pays 11 months rent to the agent who introduces a tenant to the landlord.
Lease Renewal: The tenant pays the fee to the broker representing the tenant. The normal standard rate, which
is negotiable, is 50% of one month or 8% of savings over the new three-year term based on the landlords initial
quote; and a minimum 25% of one month.
Sublease: Typically the sublandlord pays the fee to its broker. The normal standard rate, which is negotiable, is
12 months rent. The sublandlord normally offers 11 months commission to fnd a subtenant, which may be
split between the agent acting for the sublandlord and the agent acting for the subtenant. If the sublandlords
agent fnds a new tenant on his own, the broker keeps the entire fee. If the sublandlords agent acts in conjunc-
tion with an outside agent to fnd a new subtenant, then the two agents typically split the fee.
Purchase and Sale: Usually the buyer pays 1% to its broker, and the seller pays 1% to its broker. The fee is
negotiable, and infuenced by market conditions and the total value of the transaction.
Additional Fees
Both parties typically share equally a one-time cost of legal fees, stamp duty, and other incidentals involved in
preparation and execution of lease documents. With a surrender or sublease, the outgoing tenant pays the costs.
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General
No clauses in the lease may contravene the Deed of Mutual Covenant (DMC) of the concerned premises. Each build-
ing has its own DMC. DMC is a legal document binding the building owners registered in the Land Registry. It clearly
sets out the rights, interests and obligations of the owners, occupiers, tenants and property management agents
in respect of the control, administration, maintenance and management of private properties, common parts and
facilities of buildings. Source: http://www.bd.gov.hk/english/documents/code/bmg/bmg_ch2.doc. It has a binding
force over all owners, incorporated owners, managers, tenants, and users of the building. Relevant parties can take
legal action against the party who violates the DMC.
Solicitors prepare the lease agreement using fairly standard terms and conditions.
A standard tenancy agreement is common, and landlords are generally reluctant to accept major changes. Major
landlords usually have their own standard tenancy agreements, which include some landlord-specifc terms.
Right to Sublet
Large tenants normally fnd it easier to secure sublet rights than small tenants do. If a landlord agrees to grant a
sublet right, the maximum size to be sublet is specifed in the tenancy agreement. The norm is 2030% of the total
foor area.
Option to Expand
Unusual but negotiable. A right of frst refusal is more common.
The commencement date is typically subject to availability. Late delivery is rare.
Holdover by Tenant
Usually, a holdover period can be negotiated at a premium rent.
Signage and naming rights depend on the area leased and are subject to availability.
General
Feng Shui: According to traditional Chinese custom, the advice of a feng shui expert is sought when moving to a
new house or offce or retail shop. The expert advises on the suitability of the new location for the individual or
business. Feng shui experts also advise tenants as to how to improve the living or working environment.
Hong Kong Districts: Hong Kongs offce market has been traditionally dominated by a handful of centralized
districts. Central is widely regarded as the citys CBD and is the fnance district. Other centralized business hubs
include Admiralty, Wan Chai and Causeway Bay, all on Hong Kong Island, and Tsim Sha Tsui, on the Kowloon
side. More recently, some upscale decentralized markets, such as Quarry Bay in Hong Kong Island East, and
Kowloon Bay and Kwun Tong in east Kowloon, are gaining popularity.
The Hong Kong Rating & Valuation Department, a government body, has provided a commonly used classifcation
system. Only privately held offce buildings are included in this classifcation system.
Offce grades are:
Grade A: Modern with high-quality fnishes; fexible layout; large foor plates; spacious, well-designed lobbies
and circulation areas; effective central air conditioning; good lift services zoned for passengers and goods
deliveries; professional management; parking facilities normally available. Although location is not a feature of
grade in the HK Government grading system, many consultancies, like CBRE, consider certain buildings that do
not otherwise fulfll the Grade A requirements to be Grade A because of their prime location(s).
Hong Kong
Grade B: Ordinary design with good-quality fnishes; fexible layout; average-sized foor plates; adequate
lobbies; central or free-standing air conditioning; adequate lift services, good management; parking facilities
not essential.
Grade C: Plain with basic fnishes; less fexible layout; small foor plates; basic lobbies; generally without central
air conditioning; barely adequate or inadequate lift services; minimal to average management; no parking
facilities.
Transparency
Hong Kong has one of the most transparent real estate markets in Asia. The land registry system and transaction
records are well-developed and accessible to the public. Comparables that identify tenants, square feet, rents and
incentives for recent transactions are generally available.
CB Richard Ellis, Hong Kong
Benedict Ma
Associate Director, Research
+852 2820 2806
benedict.ma@cbre.com.hk
Rhodri James
Executive Director
Offce Services
+852 2820 2883
rhodri.james@cbre.com.hk
About CBRE Hong Kong: http://www.cbre.com.hk/hongkong/eng/default.aspx
For Local Market Reports: http://www.cbre.com.hk/hongkong/eng/research.aspx
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CBRE OFFICES
Bangalore
+91 80 5112 124049
Chennai
+91 44 2821 4599 / 4571
Hyderabad
+91 40 2335 8887
Kolkata
+91 33 4019 0200
Mumbai
+91 22 4069 0100
New Delhi
+91 11 4239 0200
Pune
+91 20 2605 5437 / 5367
INDIA
CHINA
INDIA
BHUTAN
BANGLADESH
UZBEKISTAN
KAZAKHSTAN
TURKMENISTAN
TAJIKISTAN
SRI LANKA
PAKISTAN
IRAN
NEPAL
KYRGYZSTAN
AFGHANISTAN
MYANMAR
(Bombay)
Mumbai
Chennai (Madras)
Hyderabad
Bangalore
Pune
Kolkata
New Delhi
LEASE LENGTH
Term: Lease terms in India are mostly three years with a tenants option to renew the lease for two more terms
of three years each. Lease terms in Mumbai are for a maximum of fve years with a break clause after the initial
three years.
Lock-in Period and Notice Period: The lock-in period is the period during which a tenant guarantees to stay in
the leased property. If a tenant vacates before the lock-in period expires, the tenant is liable to pay the rent for
the remaining lock-in period. The lock-in period ranges from 2436 months, with an option to terminate the
lease upon serving 36 months notice before the lock-in term expires.
SPACE MEASUREMENT
Gross Area
The quoted area is always the gross area. All contracts and commercial terms of a lease are based on the gross area.
Effciency
Net usable area (equivalent to the carpetable area or carpet area) is approximately 6780% of the Gross Area.
OCCUPANCY COSTS
Rent
Rental Rates: Please visit CBREs Global Knowledge Center: http://gkc3.cbre.com/search/search.aspx
Rent Quoted: Rent is usually quoted on a gross area basis in Indian Rupees (INR) per square foot per month.
Quoted rent usually excludes costs of operating and maintenance.
Rent Payable: Rent is usually payable monthly in advance.
Advance Rent: It is becoming rare for a tenant to pay the landlord advance rent. When a tenant agrees to pay
advance rent, it is adjustable over the lease term or over the frst year of the lease. Advance rent varies between
06 months rental. Advance rent is not preferred as it attracts additional stamp duty in some states. In Mumbai,
no system of advance rent exists.
Free Rent: Free rent is negotiable. In 2010, one to two free months is typical in New Delhi; one to two free
months is typical in Mumbai.
Rent Escalation: In most cases, rent escalation is pre-fxed, typically 1520% after every three years. Infrequently,
in some leases, parties agree that the tenant will pay fair market rental at the time of lease renewal, with a
ceiling or cap, i.e., maximum, to which rent can escalate from existing levels.
Maintenance Costs
The landlord charges a client for basic property management services: sanitorial services, building security services,
common area maintenance, etc.
Maintenance charges can range from INR 515 per square foot per month, depending on the building type and on
services offered, such as central air conditioning for premises, 100% power back-up, etc.
Typical area maintenance charges in Grade A buildings in New Delhi and Mumbai:
Include central air conditioning costs: INR 1520 per sq. ft. per month (central air conditioning costs include
electricity to operate the system, power back-up, and maintenance).
Exclude central air conditioning costs: INR 7 per sq. ft. per month. Tenants may get the option to exclude central
air conditioning.
Taxes
Services Tax and Surcharge: The state charges a statutory services tax on all sale transactions and leases,
because it treats them as services. The tax applies to rent, and the tenant pays it monthly. The rate in 2010 is
10% plus 3% of the 10% as a surcharge, so the total tax is 10.3%.
Municipal Taxes: The costs of municipal taxes are included in the rent. The landlord or tenant pays any increases,
depending on their agreement.
Utilities
The tenant usually pays the cost of electric consumption within its space, either directly to the public utility company via
direct meter, or through the landlord via submeter. Landlords do not mark up the electric charge when submetered.
Fit-Out
Space may be delivered in any of these conditions:
- Bare Shell: This is a simple, plain cement structure with chilled water lines and common electric connection.
The tenant must carry out interior ft-outs, electrical and plumbing work. In Mumbai, New Delhi, and else-
where, the landlord normally delivers new space as a bare shell. The tenant does the ft-out.
- Warm Shell: This includes AC ducting, basic electrical wiring and plumbing. In a warm shell lease, the client
may decide to do the ft-out or ask the developer to do it.
- Semi-Furnished Space: This comes with false ceiling, fooring, and restrooms, and the tenant does the rest.
- Fully Furnished Space: This is a plug-and-play facility ready for tenant to move-in.
In Bangalore in 2010, developers do about 70% of the ft-outs; tenants do about 30% for transactons under
100,000 square feet.
If a tenant does the ft-out, the tenant pays the architect, contractor, etc. The tenant does not need to hire the
landlords contractor nor pay the landlord a supervision fee for construction, electrical work, structural work, and
plumbing.
Fit-Out Costs: Fit-out costs for Class A or Prime buildings in major cities are typically INR 15003000 per square
foot including construction, furniture, wiring, design fees, etc.
Restoration
Most leases provide for the restoration of premises to its original condition, subject to normal wear and tear.
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The tenant pays the lessor a security deposit, which is non-interest bearing and refundable upon termination of the
lease agreement. The security deposit can range from 69 months rent regardless of the credit strength of the tenant.
Security is negotiable along with rent and other business terms, and often exceeds the amount needed to protect
against tenant default. To determine if the amount is reasonable, it is necessary to consider the terms of the entire
agreement, in addition to the tenants creditworthiness.
Landlords use security deposits:
To protect the landlord against tenant default.
To cover the landlords costs if a tenant gives notice before landlords costs have been amortized.
To fund the landlords other projects, because it is more diffcult for developers to get funding in capital markets.
Therefore, landlords tend to insist on cash, rather than letters of credit (guarantees) from banks, and resist put-
ting security deposits into escrow accounts. Landlords also resist giving bank guarantees to tenants to guarantee
return of security, because this would require landlords to maintain bank deposits to cover the amount of the
security.
Car Parking
Tenants pay extra for parking in any business district. In New Delhi and Mumbai, the standard allocation is one
space per 1000 sq. ft. leased. Some developers provide one space per 700 sq. ft. Tenants may get extra space
for parking at additional costs. Monthly parking costs per car ranges from INR 25006000 in New Delhi and
INR 500015,000 in Mumbai.
TRANSACTION COSTS
Agency Fees
New Lease: The brokerage or fee norm for real estate agents in India is one months rent from the tenant and
one months rent from the landlord, and is negotiable. When different brokers represent the landlord and the
tenant, each broker typically receives one months rent from the party it represents.
Lease Renewal: A broker is generally involved at the time of renewal by a tenant only when terms are renegoti-
ated. The tenant pays a fee based on percent of savings achieved, normally 710%.
Lease Termination: Generally, a broker is not involved. If a tenant uses a broker, the fee is negotiable.
Sublease: The sublandlord pays one month to its broker or to the tenants broker or to both, subject to
negotiations.
Registration of Lease and Stamp Duty: A lease agreement exceeding 11 months must be registered. It is valid in
a court of law only if it is registered and the stamp duty is duly paid on it. An unregistered lease document may
expose a tenant to risk in the event of a dispute. The tenant pays the stamp duty and lease document registration
charges. These charges vary from state to state in India.
- India Generally: The range is 412% of the average annual rent.
- Mumbai: For a Leave & License agreement, stamp duty charges for a 5-year tenure is INR 50,000. For a
lease, the stamp duty charges vary depending on the term and the market value of the property, and are
subject to a maximum of 5% of the property value.
India
General
India does not have a standard civil code that applies to leases.
Contracts Types: Most developers and landlords provide leases, negotiable by both parties and by their legal
counsels. In Mumbai, parties normally use a leave & licence agreement instead of a lease agreement.
- A lease (of immoveable property), as defned under Section 105 of The Transfer of Property Act, 1882, is a
transfer of a right to enjoy such property for a certain time or in perpetuity on consideration to be rendered
periodically or on specifed occasions.
- Leave & License, as defned in Section 52 of the Indian Easement Act, 1882, creates no interest in the premises
in favor of the licensee except the right to use and occupy the premises for a limited duration.
Letter of Intent: Parties usually sign a letter of intent before the fnal contract is executed between the landlord
and the tenant. The letter of intent can be binding or non-binding.
Standard leases are rare. Contracts vary from one landlord to another.
Right to Sublet
Subleasing is rare and requires landlord consent. The original tenant is liable for rent payment.
Option to Expand
Usually negotiable.
In New Delhi, a right of frst refusal is normally available in a newly constructed building to tenants that occupy
substantial areas, because new buildings typically have space availability.
A penalty is negotiable, and is typically one rent-free day for each day of delay.
Holdover by Tenant
If a tenant occupies the premises after lease expiration without renewing the lease, the tenant must pay penal rent
ranging from 25 times the rent just before expiration. The amount of the penalty is negotiated and included in the
lease.
Signage rights depend on the size of the space leased and are negotiable. A tenant leasing a very large amount
of space may get the right to affx signs, nameplates or advertisements inside and outside. Small-or-medium-sized
tenants get the right only to put their nameplate in the building lobby and at the entrance to the premises.
General
Over the past few years, with increasing participation of multinational occupiers, developers and landlords, markets
are becoming more mature and regularized. Tenants can fnd premises with all requisite approvals, title documents,
etc., in place. Earlier, most buildings were strata sold (strata-title sold) and were not registered with the government
department. The term strata-title means that the units in a building are owned by various occupiers or investors.
International occupiers typically lease buildings, rather than own, as there are restrictions on their purchase of offce
property.
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Transparency
Gradual reforms are taking place in rules and regulations. The Government has relaxed foreign direct investment
norms for overseas frms to invest in India, leading to the entry of big international real estate funds and developers,
and prompting a move toward greater transparency.
Comparables, indicating tenants, square feet, rents, and incentives, are generally available in Mumbai and New
Delhi, Bangalore, Pune, and Chennai.
Although no formal system is used to classify offce buildings, these terms are used informally:
Grade A Buildings: These have large foor plates, big lobbies, air conditioning, professional facility management
services and quality construction. Grade A space is centrally air conditioned, with dedicated parking, security
and common property management (also called common area management). Most Grade A properties hire
companies like CBRE for their common property management.
Grade B Buildings: These have lower-quality construction and fewer facilities than Grade A.
Grade C Buildings: These have minimum facilities.
CB Richard Ellis, India
Manish Kashyap
Managing Director
+91 11 4249 0200
manish.kashyap@cbre.com
About CBRE India: http://www.cbreindia.com/india/eng/default.aspx
For Local Market Reports: http://www.cbreindia.com/india/eng/research.aspx
India
CBRE OFFICES
Fukuoka
+81 92 472 1711
Hiroshima
+81 82 243 9321
Kanazawa
+81 76 239 4041
Kobe
+81 78 392 5431
Kyoto
+81 75 257 7881
Nagoya
+81 52 205 6541
Nihombashi
+81 36 895 5001
Osaka
+81 66 261 2111
Saitama
+81 48 642 9831
Sapporo
+81 11 231 6931
Sendai
+81 22 262 5651
Shinjuku
+81 33 343 3731
Takamatsu
+81 87 821 2601
Tokyo
+81 35 470 8711
Yokohama
+81 45 316 4311
The CBRE Tokyo offce
handles inquiries for
Japan
+81 35 470 8800
JAPAN
JAPAN
Sapporo
Sendai
Osaka
Fukuoka
Takamatsu
Hiroshima Kobe
Yokohama
Nagoya
Kanazawa
Kyoto
Saitama
Tokyo
LEASE LENGTH
Term
Landlords and tenants have a choice of using either traditional or fxed-term leases.
Traditional Leases: A traditional Japanese lease is for two years, is perpetually renewable, and offers security of
tenure to occupiers. As long as a tenant pays rent, the tenant can retain occupancy. The tenant commonly has
the right to terminate (Kaiyaku Yokoku) the lease at any time upon six months written notice without penalty.
This six-month termination provision is extremely important and allows tenants to take maximum advantage of
market conditions.
Fixed-Term Leases: A fxed-term lease provides no right to renew. A tenancy law revision in early 2000 allowed
landlords and tenants to enter into longer fxed-term leases without the tenants right to renew unilaterally. In a
fxed-term lease, an option to terminate is by negotiation. A tenant may cancel a contract at any time by paying
a rental fee equivalent to the period stated in the contract.
Trend and Recommendation: Landlords of Grade A buildings in prime locations are pushing for fxed-term
leases, but the traditional lease prevails in the overall market. Tenants familiar with the old market practice
of traditional leases should consider the impact of a fxed-term lease on their long-term real estate cost, and
should balance the loss of term fexibility with fexibility elsewhere in the lease, including lower rent and sublease
options.
Renewal
Option to Renew/Renewal Fee (Koshin-ryo): Some small- and medium-sized buildings require a renewal fee, usually
one months rent at the rate stipulated in the new rental contract.
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SPACE MEASUREMENT
Defnitions
Floor space (menseki) is usually measured in square meters or in tsubos.
1 tsubo = 3.3058 square meters = 35.58 square feet
Exclusive Tenant Space (senyo menseki): Space occupied by a tenant, measured from wall center to wall center.
Common Space (kyoyo menseki): Halls, and restrooms and elevators shared by two or more tenants.
Contracted or Rentable Space (keiyaku menseki): This can either include or exclude part of the common space,
although it is more likely that part of the common space be excluded.
Effciency
Contracted space is normally exclusive tenant space, so effciency is 100%.
OCCUPANCY COSTS
Rent
Rent Quoted: Rent is normally quoted in Japanese Yen (JPY) per tsubo per month; rarely JPY per square meter
per month. Some landlords quote gross rent, known as Kyoeki-hi Komi: i.e., rent for the leased area, plus
common area maintenance fee (also called common expense charges or CAMF, or Kyoeki-hi) combined. Other
landlords quote net rent and CAMF separately. No offcial term exists for net rent.
Rent Negotiability: Long-term tenants with strong landlord relationships often can negotiate a below-market
rent.
Rent Payable: The frst months rent is paid in advance at move-in. Rent is payable monthly in advance.
Rent Commencement: Rent usually begins on the day a tenant takes possession (lease commencement).
Occasionally, rent may commence the day a tenant moves its equipment in or begins remodeling. Landlords of
new buildings are sometimes more fexible on terms when they have a pressing need to attract tenants.
Rent during Fit-Out: In a strong market, it is common for a tenant to pay rent while ftting-out the space. In
a weaker market, ft-out can usually be completed during rent-free periods that are negotiable, although the
common area maintenance fee typically remains payable.
Free Rent: Free rent is typically 36 months total in the late-2010 market. The amount of free rent also depends
on conditions, such as whether the leasing structure is traditional or fxed-term. Landlords generally give more
free rent with fxed-term leases because they tend to be longer than two years.
Rent Escalation: Rent escalation is negotiable. Typically, landlords attempt to raise rents to cover increases in the
land tax, building tax or cost of living. Rent is not indexed.
Rent Increases at Renewal: Rent is usually revised when rental contracts are renewed. For traditional leases, this
occurs every two years. For fxed-term leases, this occurs on lease expiration, when the tenant must contract for
a new term at the then-market rent.
Items Covered in Base Rent: The owner normally pays the cost of insurance, repairs and property taxes, which
are included in the base rent.
Common Area Maintenance (CAM) Charge (Kyoeki-hi)
Costs Included in CAM Charges: These charges cover operating costs to maintain the common areas of the
building. Large high-rise offce buildings generally include air conditioning in the common expense charge for
prescribed offce hours, with an additional charge for usage outside of those hours.
The cost of standard security services is included within the common area maintenance (CAM) charge.
Typical Monthly CAM Charge for a Grade A building in Tokyo is JPY 40006000 per tsubo.
Adjustments: CAM charges are usually not adjusted unless signifcant changes occur in the economic environ-
ment, whereas the traditional lease provides for rents to be reviewed every two years.
Japan
Negotiability: CAM charges are usually not negotiable because they are considered direct cost recoveries. In
actuality, a market rate prevails, and over time the owner may proft from these recoveries. This extra cost is
sometimes avoidable if a tenant has suffcient negotiating leverage.
Disclosure is not required. Building owners in Japan are usually not required to disclose actual uses of Kyoeki-hi.
No formula exists to explain the relationship between actual utility usage and the fee tenants pay as Kyoeki-hi.
When a tenant pays gross rent, known as Kyoeki-hi Komi, all CAM charges, outlined above, are included in the
rent.
Taxes
Fixed Asset Tax: The fxed asset tax is levied on fxed assets including land, building and other depreciable assets
for business purposes. Both the building owners and tenants pay fxed asset taxes. The building owners pay tax
on the property (skeleton) and the tenants pay tax on the additional improvements. A tenant that remodels its
occupied space may incur a fxed asset tax (depreciation tax).
Business Offce Tax: The business offce tax is levied on the buildings and on the number of employees em-
ployed in the buildings. It is payable by owners of buildings and corporations that occupy over 1000 square
meters in foor space and/or having more than 100 employees in the subject property.
Consumption Tax (C-Tax): 5% C-Tax is charged on all outgoings including rent, improvements, and utility
charges, but not on the security deposit.
Utilities
Electricity: Tenants normally pay the landlord for electricity based on a meter, although sometimes based on the
amount of space occupied. The cost of electricity is typically JPY 1030 per kwh.
Central air conditioning cost is included in CAM for normal business hours, called core time. Tenants pay for
overtime air conditioning cost by a meter.
Unit AC system costs are billed at a metered rate as electricity.
Water charge for common use space is included in CAM. When tenants have water in occupied spaces, it is
charged according to usage as measured by a meter.
Fit-Out
The landlord normally provides a drop (i.e., suspended) ceiling and sometimes ceiling lights.
The tenant normally pays for all other improvements, including restrooms within the demised premises. Most
Grade A buildings have approved architects and contractors that tenants must use, even where their rates are
above market. The landlord often charges for the review of design documents and for supervision.
Fit-out costs for Grade A or Prime buildings in major cities normally range from JPY 300,000600,000 includ-
ing construction, furniture, wiring, design fees, etc., for 100010,000 sqm.
Restoration
Restoration is known as Genjo-kaifuku. At the end of the lease contract, the tenant, at its own expense, restores the
premises to its original condition. Such restoration usually includes, at a minimum, repairs to all walls, foors and
ceilings and removal of tenant-installed fxtures.
Deposit Money (Hosho-kin/Shiki-kin): Tenants leasing offce space in Tokyo almost always pay the owner a non-
interest-bearing deposit before occupancy. The lessor returns it when the tenant vacates after deducting unpaid rent
or damages. In 2009 and 2010, 1012 months of rent is typical, regardless of the tenants nationality.
Car Parking
In central Tokyo, rent per parking space is generally JPY 50,00090,000 per month. If a tenant uses parking spaces
in the building it occupies, the cost is negotiable. If the demand for parking space exceeds supply, spaces are usually
allocated based on the foor area occupied.
Cleaning: The tenant usually pays for cleaning of the tenants space.
Insurance Costs: In Tokyo, both the owner and the tenant usually buy insurance to cover property damage and
personal injury. The tenants or owners insurance company pays, depending on which party is at fault.
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TRANSACTION COSTS
Agency Fees (Chukai Tesu-ryo)
In Japan, the tenant pays the introducer (agent) a commission. Landlords rarely deal directly with tenants, so tenants
must use and pay agents to see available space. Typical agency fees are as follows:
New Lease: One months rent; normally the tenant pays. This applies to both traditional and fxed-term leases.
When different brokers represent the landlord and the tenant, this fee is divided, as negotiated.
Sublease: One months rent; normally the subtenant pays.
No other signifcant costs apply to general offce leases.
General
The Land Lease and House Lease Act governs offce leases.
The big landlords usually use their own contract formats for leasing contracts.
Right to Sublet
Sublease and assignment are rarely allowed.
Option to Expand
Negotiable. Major tenants usually get a right of frst refusal.
Late delivery by landlord is rare in Japan.
Holdover by Tenant
A traditional Japanese lease automatically renews for a new two-year term. Fixed-term leases give the tenant no
security of tenure. Issues of renewal and holdover are yet to be tested in the courts.
Modern Grade A buildings normally offer prominent signage. Tenants that occupy an entire building may be able to
negotiate naming rights.
Transparency
New and higher standards of transparency and disclosure are becoming more common in the Japanese real estate
market. Nevertheless, Article 45 of the Land and House Lease Law prohibits disclosure of information gained through
completion of a transaction, regardless of whether or not a confdentiality agreement was executed between parties.
Therefore, details of comparable leasing transactions are unavailable.
Grade A Buildings are generally new, meet new earthquake-resistant standards, and are in mature offce districts.
Grade S Buildings meet criteria of Grade A and are usually landmark properties with distinctive functionality.
Other grade buildings are typically older, less highly specifed and further from transportation.
Japan
CB Richard Ellis, Japan
Fred Takahashi
Executive Director
+81 35 470 8870
fred.takahashi@cbre.co.jp
About CBRE Japan: http://www.cbre.co.jp/Pages/Default.aspx
For Local Market Reports: http://www.cbre.co.jp/EN/Research_Center/Pages/default.aspx
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REGROUP ASSOCIATES OFFICE
Kuala Lumpur
+603 2092 5955
MALAYSIA
Kuala Lumpur
MALAYSIA
CAMBODIA
VIETNAM
THAILAND
MALAYSIA
SINGAPORE
INDONESIA
BORNEO
BRUNEI
LEASE LENGTH
Term
A typical tenancy term is 3+3 years; i.e., an initial term for three years with a tenants option to renew for three more
years at a rental reviewed at the prevailing market rent.
Renewal
An option to renew for additional terms of 13 years is common, usually for one or two terms only for small spaces
and up to fve terms for larger occupiers. For example:
A small occupier may negotiate an option for one additional term, e.g., 3+3 years.
A small occupier may negotiate options for two additional terms, e.g., 3+3+3 years.
A larger occupier may negotiate up to fve terms, e.g., 3+3+3+3+3+3 years.
Termination
An option to terminate is not common, but if included, the tenant or landlord typically must serve 36 months in
advance and may have to pay a specifed penalty.
SPACE MEASUREMENT
Net Lettable Area
Space is commonly measured and quoted as net lettable area in square feet, which includes usable area and internal
columns but excludes common areas such as lift lobbies, corridors, toilets and mechanical and electrical rooms. The
net lettable area rarely includes toilets and primary circulation for tenants that occupy full foors or entire buildings.
Effciency
When a tenant leases less than a full foor, the net lettable area equals the carpetable area; therefore the effciency
is 100% and the loss factor is 0%.
If toilets and the primary circulation area are included in the net lettable area, as discussed above, effciency is
less than 100%.
OCCUPANCY COSTS
Rent
Gross Rent Quoted: The landlord quotes rent that includes service charges and air conditioning during normal
offce hours.
Currency: Malaysian currency is Malaysian Ringgit (MYR or RM). Rent is quoted in MYR/sq ft/month.
Gross Rent Includes: Cost of staffng, cleaning, maintenance, sanitation, and repairs of entire building except for
tenanted areas. Also statutory outgoings, building security, administrative costs, etc.
Rent Payable: Rent is payable monthly in advance.
Free Rent: A rent-free period for the ft-out term generally ranges between 13 months, depending on the
amount of space leased.
Service Charge Increases: The tenancy agreement typically specifes that the tenant pays a proportionate share
of increases in service charges. However, this is not commonly invoked.
Review to Market: Upon renewal, rent is normally reviewed to market, i.e., increased or decreased to market
rent. Rent renewals are commonly determined by negotiation and review of comparable transactions.
Property Tax Increases: The landlord pays the property tax. The tenancy agreement typically provides for the
tenant to pay a proportionate share of any increases.
Security Deposit and Utility Deposit: The tenant pays 23 months gross rent for security deposit and one month
gross rent for utility deposit (for electricity) to the landlord upon signing the tenancy agreement. The deposit is
usually in cash. A deposit in the form of a bank guarantee is rare, and only occasionally allowed for a substan-
tial anchor tenant.
Fit-Out Costs: Fit-out costs for Class A or Prime buildings in major cities normally range from MYR 100200 per
sq. ft., which includes construction, furniture, design fees, etc. The improvements are subject to the landlords
consent.
Electricity Charges for the Demised Premises: The tenant pays either the landlord or the utility company for
actual usage based on a meter.
Air Conditioning Charge: The cost of air conditioning during normal hours is included in the rent. An additional
hourly charge applies for after-hours air conditioning. The amount charged depends on air conditioning zones
and ranges between MYR 50150 per hour per zone.
Car Parking: Car parking charges are payable in addition to gross rents. Parking bays are generally allocated
based on a ratio of approximately one bay per 1000 sq. ft. of offce space leased. Additional car parking is
arranged privately with the landlord or car park operator. In the Kuala Lumpur city area, car parking typically
costs MYR 150250 per bay per month.
Restoration: A typical tenancy agreement stipulates that the tenant must restore the demised premises to their
original condition.
TRANSACTION COSTS
Agency Fees
For New Lease: The landlord usually pays agency fees. However, when different agents represent the landlord
and the tenant, each party normally pays its agent. The following maximum fee scale, approved by the Board
of Valuers, Appraisers and Estate Agents, applies for the initial tenancy period only and is subject to 5% govern-
ment service tax.
- Up to three years: 1.25 months gross rental.
- Exceeding three years up to four years: 1.50 months gross rental.
- Exceeding four years up to fve years: 1.75 months gross rental.
- Exceeding fve years: 1.75 months gross rental.
- Exceeding fve years (without option for renewal): 1.75 months gross rental.
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- Exceeding fve years (with option to renew): 1.75 months gross rental plus 0.25 months gross rental for each
additional year.
For Lease Renewal: Frequently the landlord negotiates renewals without an agent. If the landlord engages an
agent, the landlord pays the agent. If a tenant engages an agent to negotiate its lease renewals, the tenant pays
its agent. The maximum fee scale for rent reviews, as approved by the Board of Valuers, Appraisers and Estate
Agents, is 50% of the fees chargeable for new leases (outlined above), subject to a6% government service tax.
For Lease Termination: No specifc fee scale exists because tenants rarely engage agents for lease terminations.
For Purchase and Sale: The seller normally pays its agent. The buyer customarily does not appoint an agent. The
maximum scale fees as approved by the Board of Valuers, Appraisers and Estate Agent, Ministry of Finance for
Sale and Purchase of land and buildings is 3%, subject to a6% government service tax.
The tenant pays legal fees, stamp duty, and other incidentals involved in the preparation and execution of tenancy
agreements. For offce space, the landlord prepares the lease document and charges the tenant administrative fees
(including legal fees), plus stamp duty for the tenancy agreement.
General
There are no specifc laws relating to commercial leases. In the event of any dispute, the Law of Contract, The
National Land Code and case law will apply.
There are no standard leases, but many leases have similar terms.
Right to Sublet
Subletting is rare. The tenant must obtain the landlords approval before subletting to a third-party tenant.
Option to Expand
An option to expand is not common, but if included will indicate the tenants frst right of refusal when a specifed
space becomes available.
This is rarely addressed in the lease.
Holdover by Tenant
This is rarely addressed in the lease, which may provide for double rent in the event of an unauthorized holdover.
This may be available to large tenants for an additional fee.
General
Leasing Process: The landlord gives a Letter of Offer to the tenant together with a copy of the Tenancy
Agreement. Upon agreement of the terms, the tenant accepts the offer and pays an earnest deposit to reserve
the premises. Earnest deposit is typically one months gross rent (upon signing of the tenancy agreement, this
earnest deposit is then treated as the one month advance rent). Within 14 days, the tenant and landlord must
enter into a Tenancy Agreement. Upon signing of the Tenancy Agreement, the tenant is required to pay two to
three months security deposit, one month utility deposit and one month advance rent.
Business Days and Hours: Malaysia runs on an 8-hour working day system with Saturdays and Sundays as days
of rest, although Saturdays are half-days for some private frms. The states of Kelantan, Terengganu and Kedah
have different offce hours. Sundays through Thursdays are full working days, and the weekend starts on Friday.
Private sector offce hours can be from 9am to 6pm Monday through Friday and 9am to 1pm on Saturdays,
although most private sector companies operate on a 5-day week. Government offce hours are usually from
Malaysia
8am to 5pm Monday through Friday. Lunch hours for government offces are generally 1pm to 2pm Monday
through Thursday and 12:15pm to 2:45pm on Friday (extended for Muslim religious observance).
Transparency
For the Kuala Lumpur market, information on recent transactions including names of tenants, lease terms, size and
rents, although not disclosed in any public domain, are generally available on an indicative basis.
Grade A buildings may include:
Location in prime business districts.
High-quality building interior and exterior fnishes.
High-quality mechanical and electrical (M&E) provisions: particularly air conditioning, building automation
systems (BAS), high speed lifts and other intelligent building and security systems.
Relatively column-free foor layout.
Grand ground foor lobby, typically with double-height ceiling.
Suffcient car parking provisions.
High foor-to-ceiling clearance.
Facilities such as executive toilets and kitchenettes/pantries.
Large vertical cable ducts, uninterrupted emergency power supply, under-foor trunking or raised foor.
CB Richard Ellis (Malaysia) Sdn Bhd
Agency Department Contacts
Christopher Boyd
Executive Chairman
+603 2092 5955
chris.boyd@cbre.com.my
Paul Khong
Executive Director
+603 2092 5955
paul.khong@cbre.com.my
Research Department Contacts
Marlene Padan
Senior Vice President, Research & Consultancy
+603 2092 5955
marlene.padan@cbre.com.my
Nabeel Hussain
Vice President, Research
+603 2092 5955
nabeel.hussain@cbre.com.my
About CB Richard Ellis Malaysia: www.cbre.com.my
For Local Market Reports: Please visit our website.
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CBRE OFFICES
Cebu
+632 238 4211
Manila
+632 752 2580
PHILIPPINES
PHILIPPINES
Manila
Cebu
LEASE LENGTH
Term
A lease can be of any length. Two to fve years with an option to renew is typical. Larger tenants often lease for ten
years.
Termination
This option is negotiable. Pre-termination (i.e., early termination) penalties for both tenant and landlord are included
in the agreement which is subject to acceptance of both parties.
Renewal
A renewal option is negotiable. The rent may be reviewed to market rent at the time of the option and based on a
minimum increase percentage, or otherwise negotiable.
SPACE MEASUREMENT
Defnitions
Offce space is measured in square meters.
Leaseable Floor Area (LFA), also called leasable area or rentable area, is the basis of offce space measure-
ments. LFA measurement is taken from the internal fnished surface of permanent walls and from the internal
fnished surfaces of dominant portions of the permanent outer building wall.
- LFA includes areas occupied by window mullions, window frames, structural columns, engaged perimeter
columns or piers and areas occupied by additional facilities specially constructed for individual tenants other
than in the areas described in the exclusions. LFA includes lift lobbies, passageways, toilets, washrooms,
pantries, and similar useable areas.
- LFA excludes stairs, lift shafts and motor rooms, and all vertical shafts that carry services.
Gross Floor Area measurement extends to the permanent outer building wall. It includes space occupied by
vertical shafts (stairwells, elevator shafts, and electrical and telecommunications risers, etc.).
Net Useable Area (NUA), is also known as carpetable area.
- Measurement is taken from the internal fnished surfaces of permanent walls and from the internal fnished
surfaces of dominant portions of the permanent outer building wall.
- For subdivided foors measured in the center of inter-tenancy walls or partitions except where the walls or
partitions adjoin public areas, measurements are taken to the line of the dominant portion of the public area.
- Included in the NUA are areas occupied by window mullions, window frames, structural columns and areas
occupied by additional facilities specially constructed for individual tenants other than the areas listed below.
- The usable area normally excludes: (1) All stairs, recessed doorways, toilets, cleaners, storerooms, lift shafts
and meter rooms, escalators, smoke lobbies, tea rooms and other service areas that are standard facilities in
the building; (2) Lift lobbies; (3) Public spaces or thoroughfares; (4) Areas occupied by electrical or telephone
conducts and air conditioning risers to the foor if standard in the building; (5) Areas and access ways for
service vehicles and for delivery of goods, unless for the exclusive use of one occupier; (6) Car parking areas
and access ways thereto, unless for the exclusive use of one occupier; (7) Areas with less than 1.5 meters clear
height above foor level.
Effciency
A typical ratio of net usable (carpetable) to leasable (rentable) area for a Class A building in Manila is 8085%.
OCCUPANCY COSTS
Defnitions
Monthly Dues (also called Building Management Dues): This is the payment made monthly to cover the costs of
the upkeep of common use and service areas, security and other general services that the landlord provides.
Service Charge: This is a charge for a service outside the common services offered by the landlord. Charges
for cleaning the offce premises and charges for assistance in moving furniture and equipment are normally
considered service charges.
Advance Payment (also called Advance Rent Payments): These typically include three months advance rent,
which the owner applies to the last three months of the lease term, plus a security deposit equivalent to three
months rent.
Up Front Payment: Up front payment = advance payment + additional payments, which may include a con-
struction bond, electrical charges, etc.
Costs due at signing include: (1) Up-front payment, (2) Quarterly rent payment, and (3) Fit-out deposit, which the
landlord refunds after the ft-out is complete.
Rent
Rent Quoted and Paid on Net Basis: Landlords quote rent in Philippines Pesos (PHP or PhP) per square meter per
month. Offce rentals in major central business districts are generally on a net basis.
Rent Payable: In addition to the up-front payment, tenants usually pay rent quarterly in advance.
VAT: 12% value added tax applies to all rental charges.
Rent Escalation: Rents usually escalate annually starting on the second year of the lease term. This is subject to
an agreement between parties, and may depend on the length of the lease term and other factors.
Costs Included in Rent: The landlord pays for rates on land tax, which is the only real estate tax. The landlord
pays for external and structural repairs.
Free Rent Period: The owner may grant a one- to three-month free rent period for ft-out, prior to rent com-
mencement. Additional free rent periods are rare.
Monthly Dues (Building Management Dues)
Monthly dues are also called building management dues. Parties negotiate and specify in the lease which items the
landlord pays and the items the tenant pays. The tenant pays monthly dues, which are subject to annual review.
Monthly dues typically cover:
Building staff salaries, including security staff.
Electricity and water for common areas.
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Air conditioning of common areas, such as hallways and lobby.
Some Repairs: Elevator repair and maintenance, locks and security devices.
Cleaning of the common areas.
Taxes
The landlord pays for real property tax, which is the only real estate tax. The real property tax covers the land tax and
tax on the building.
Utilities
Electricity and Water: The tenant pays the utility company directly for usage within the premises, as measured by
a meter.
For Air Conditioning of Tenants Premises:
- The tenant pays the power company or the landlord, based on metered consumption. This usually applies to
offces operating on 24/7 basis, or
- Air conditioning for regular offce hours is part of the monthly dues, and the tenant pays extra for air condi-
tioning outside the normal offce hours.
Cleaning: The tenant normally hires and pays the cleaning staff to clean the tenants space.
Fit-Out
Landlord Work: The landlord generally provides the external walls, acoustic ceiling boards, lighting fxtures, air
conditioning ducts, sprinkler system, smoke detector, fre hydrant and fre extinguisher and restrooms, or delivers
ft-out from the previous tenant.
Tenant Work: The tenant normally undertakes and pays for the ft-out and is usually free to choose its contrac-
tors. Design restrictions may apply.
Fit-out costs: The cost for interior construction, furniture, wiring, and design fees ranges from: PHP 15,000/sqm
for middle-range work, to PHP 30,000/sqm for high-end work.
Restoration
Restoration of property to its original condition after the lease term expires is negotiable and addressed in the lease
contract. Lease contracts, especially in better-quality buildings, require that the tenant leave the premises in good
order, and repair and make good any damage.
The security deposit normally equals three months rent, and is refundable after the lease expires. Any costs to cover
tenant-caused damages to the leased area are subtracted from the security deposit. Handover condition (e.g., bare
shell, semi ftted, fully ftted) should be clearly stipulated in the lease agreement.
Car Parking
Parking Spaces: The tenant normally pays for parking separately from rent.
Insurance: Tenants are liable for insuring the contents of their offce. Tenants usually take out an insurance policy
at their own initiative to cover costs from damages incurred during operation of their business. Some landlords
require tenants to show proof that they are insured.
Extra security if needed.
TRANSACTION COSTS
Typical Agency Fees
Fees shown below for new leases, lease renewals, purchase and sales, lease termination and sublease are divided
50%50% when separate brokers represent landlord and tenant.
New Leases: The landlord pays the agency fee to its broker for new leases: one months rent for leases up to
three years, 1 months rent for leases over three years and below fve years, and two months rent for leases
over fve years.
Philippines
Lease Renewals: The tenant pays the fee to tenants broker, which is usually a percentage of the savings in the
renegotiated rate or month for straight renewal. The tenant pays 75% of one month for rent review.
Lease Termination: Tenant pays 15% of frst years savings or 75% of one months rent.
Sublease: The sublandlord pays one months rent for leases up to three years, two months rent for leases over
three years, and three months rent for leases over fve years.
Lawyers: Consultation with lawyers in terms of the contract is common. The tenant usually bears other legal
costs, such as traditional due diligence which includes verifcation of title and ownership, encumbrances of
property, illegal tenants or existence of other lease agreements, updated payments of taxes and other pertinent
dues (e.g., building management, association dues, etc.) The tenant does not typically pay the cost of the land-
lords lawyer.
Notaries: Notarization of the contract may be done by either of the parties. Notarization is a common practice
and adds protection for both tenant and landlord, as this makes the contract admissible as evidence when
litigating lease agreement disputes.
General
No specifc laws govern offce leases. Parties rely on the lease agreement for protection.
Terms and clauses are essentially the same from contract to contract, although no uniform template exists. Each
landlord has its own way to format the document. Each landlord has its own contract.
Right to Sublet
Rare.
Option to Expand
Negotiable.
Rental rebates are typical.
Holdover by Tenant
No standard practice exists.
Signage and naming rights and costs vary and may be negotiable, depending on building and tenant size, tenant
profle, location, etc.
General
The landlord or the tenant may initiate the process by submitting a proposal to the other.
The tenants agent commonly submits a letter of intent before parties proceed to the fnal contract.
Transparency
Information about tenants, square meters and rents and incentives for recent transactions is not generally available
or shared.
Prime (also called Premium) buildings typically have: (1) High-quality, well-maintained interior and exterior
fnishes; (2) Large foor plates: not less than 1000 sqm; (3) Ratio of leasable area to gross foor area of 80%
or less, due to larger common areas; (4) Adequate parking facilities for building occupants and guests; (5)
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One hundred percent back-up power; (6) Telecommunication redundancy; (7) Central air conditioning capable
of 24/7 operation; (8) Lift services zoned for passengers; (9) Building management system (BMS); (10) Extra
amenities, aside from cafeteria or food court, such as business centers, ftness gyms, conference facilities, etc.;
(11) Central location within prime business districts.
Grade A buildings have features similar to those of prime buildings, although they may lack the extra amenities
outlined above.
Grade B and Grade C buildings have interior and exterior fnishes of lower quality than Grade A buildings.
Floor plates are generally less than 1000 sqm with a building effciency of not less than 85%. Back-up power is
typically limited. Parking facilities within building premises are limited. Call centers and other Business Process
Outsourcing (BPO) tenants may choose these buildings, which may be located where more human resources are
available and rents are lower.
CB Richard Ellis, Philippines
Joey Radovan
Vice Chairman
+632 752 2580
joey.radovan@cbre.com.ph
About CBRE Philippines: www.cbre.com.ph/
Philippines
CBRE OFFICE
Singapore
+65 6224 8181
SINGAPORE
MALAYSIA
INDONESIA
SINGAPORE
Singapore
LEASE LENGTH
The lease term is normally three years with an option to renew for three more years at an agreed rent or at the
prevailing market rent at the time of renewal. Landlords do not give an option to terminate.
SPACE MEASUREMENT
Net Lettable Square Feet
Space is measured and quoted as net lettable square feet, which:
Includes carpetable area (i.e., the area available to the tenant for offce use).
Includes space occupied by columns (i.e., pillars).
May or may not include corridors between elevators and tenant space.
Excludes areas occupied by toilets, elevators, shafts, exterior walls, and ground foor lobby space.
Effciency
A typical ratio of carpetable area to net lettable area in a Class A building in Singapore is 90%.
OCCUPANCY COSTS
Rent
Gross rents: All rents in Singapore are gross: i.e., they include a service charge for specifed services, including
building staff, building security, building repairs, air conditioning during normal offce hours, elevator mainte-
nance and common area cleaning. The tenant pays a 7% Goods & Services Tax (GST) on the gross rent.
Rent Quoted: Rent for offce space is quoted in Singapore dollars (SGD) per square foot per month.
Rent Payable: Rent is payable monthly or quarterly in advance.
Free Rent: Tenants are normally given a reasonable rent-free period for ft-out, typically 12 months, before the
lease commencement date or before the rent commencement date, as negotiated.
Rent is normally fxed, not escalated, during the term.
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Operating Costs
Operating costs are included in the gross rent.
Taxes
Property Tax Increases: Although the landlord pays the property tax levied by the Inland Revenue Authority of Singapore,
a provision in the lease is usually included that allows the landlord to recover from the tenant any tax increase during
the lease term which is attributable to the premises.
Utilities
The tenant pays directly to authorities for water, electricity and telecom services. The tenant must arrange with
Singapore Powers Services to install a separate utility meter and with Singapore Telecom to lay telecommunication
lines within the premises. The tenant pays 7% GST on utility charges.
Fit-Out
Landlord Work: The landlord normally delivers space with a foor management system and ceiling system,
including tiles, light fttings, sprinkler heads, and central air conditioning with ductwork, diffusers, etc.
Tenant Work: The tenant normally carries out the remaining ft-out.
Fit-out costs for Class A or Prime buildings in major cities normally range from SGD 70120 per sq. ft. including
construction, furniture, wiring for telephones, data and electricity, design fees, etc., but excluding technology
(i.e., excluding switchboard, IT equipment, photocopier, etc.).
Restoration
A standard clause in the lease agreement requires tenants to restore (reinstate) the premises to their original condi-
tion, except for fair wear and tear. This clause is negotiable.
A non-negotiable rental deposit, typically equivalent to three months gross rent, sometimes more for a less credit-
worthy tenant, is payable as follows:
Upon confrmation of the intention to lease space (upon signing a letter of offer), an initial security deposit of
one months gross rent is payable.
Upon signing the lease agreement or taking possession of the premises, a balance of two months gross rent is
normally payable.
The landlord refunds three months gross rental deposit to the tenant upon lease expiration, subject to the
tenants due performance of terms and conditions of the lease.
The landlord reserves the right to deduct all costs payable by the tenant due to a breach by the tenant.
Car Parking
Tenants pay extra for parking. Class A buildings normally provide one space per 10002,500 sq. ft. leased.
TRANSACTION COSTS
Agency Fees
These rates are fxed, not negotiable. If separate brokers represent the two parties, the brokers split the fees.
New Lease: Landlord pays one months gross rent.
Lease Renewal: Tenant typically pays month or 815% of savings during lease period. The agents fee is
subject to negotiations with the tenant as well as market conditions.
Lease Termination: Tenant pays one months rent.
Sublease: Sublessor pays one months rent.
Purchase: Owner, or sometimes buyer, pays 1%.
Singapore
Legal Fees and Stamp Duty
The landlords solicitors normally prepare the lease agreement. The tenant normally pays legal fees, stamp duty
and other incidentals in preparation and execution of the lease documents by the landlord. Market practice is for the
tenant to pay legal fees for both the landlords lawyer and tenants lawyer.
Every landlord has its own lease. Leases vary among landlords.
Right to Sublet
Subletting is rare and usually not addressed in the lease agreement. Landlords require approval for subletting, and
usually allow for partial subletting.
Option to Expand
This is sometimes granted. A right of frst refusal is normally available only to anchor tenants.
Most tenancy agreements do not address late delivery, except with buildings under construction. In buildings under
construction, the tenancy agreement may provide for changes in the delivery dates.
Holdover by Tenant
The typical penalty is double rental, and is not usually negotiable. Some lease agreements do not address the issue
of holdover. Usually both parties will come to some agreement on this before the lease runs out.
The landlord may grant this beneft to major tenants who lease over 20% of the buildings net lettable area.
Transparency
Comparables, which identify tenants, square feet, rents and incentives, are generally available for recent transactions.
Grade A: A landmark building with modern fexible design and state-of-the-art building services, prestigious
fnishes. Professionally managed.
Grade B: Quality building with modern building services. Good-quality fnishes and professionally managed.
Grade C: Average building with average building services.
Grade D: Deteriorating building, poorly maintained.
CB Richard Ellis, Singapore
For enquiries on offce leasing, please call +65 6224 8181
About CBRE Singapore: www.cbre.com.sg
Singapore
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CBRE OFFICE
Seoul
+822 2170 5800
SOUTH KOREA
SOUTH
KOREA
NORTH
KOREA
JAPAN
CHINA
Seoul
LEASE LENGTH
Term
A term of two to three years is typical. Landlords in 2010 generally prefer longer leases.
Termination
These options are negotiable.
Renewal
These options are negotiable.
SPACE MEASUREMENT
Defnitions
Gross Area is the sum of the common area and net area. The tenant pays the deposit, rent and maintenance
fees in Korean Won (KRW) based on gross area, expressed in square meters.
Common Area is the space for common use of tenants. Lobby, elevators, elevator hall, and restrooms are all
included in the common area (most buildings include parking space as common area, and provide tenants with
free parking according to the amount of offce space that tenants occupy).
Net Area is the exact space that tenants can use for their offces.
Pyung: One pyung equals 3.3058 sqm, and is nearly the same as ping, used in China, and tsubo, used in Japan.
From July 2008, the unit of space measurement is square meters, which has replaced pyung, according to the
law.
Effciency
The typical ratio of net area to gross area for a Class A building in Seoul is approximately 53%.
OCCUPANCY COSTS
Defnitions
The two principal leasing systems in Korea are Wolsei and Jeonsei.
Wolsei: The wolsei (monthly basis rent) system is similar to the rental system used in the U.S. and other countries.
The tenant pays a security deposit (typically equivalent to ten months rent), monthly rent, and maintenance fees.
Almost all Grade A buildings accept only wolsei rent. Most foreign occupiers lease on a wolsei basis.
Jeonsei: With the outdated jeonsei system, the tenant pays key money or jeonsei to the landlord in lieu of a
monthly net rent. This sum is equivalent to 6070% of the capital value of leased space and is returned without
interest at lease termination or expiration. Tenants are responsible for monthly maintenance fees. Only a few
offce buildings in the outer areas of CBD, Gangnam Business District (GBD), Yeouido Business District (YBD),
and residential properties still use the jeonsei system. Most are converting to a monthly basis rental system.
The information in this section applies to wolsei leases.
Rent
Rent Quoted: Rent is quoted per square meter per month.
Rent Payable: Rent is payable monthly, together with maintenance fees.
Rent Escalation: This is based on CPI or Market (37% based on asking rents).
Free Rent: Tenants in 2010 commonly get free rent beyond the ft-out period. However, they must pay the
maintenance fee during the free rent period.
Maintenance Fees
Maintenance fees are based on market rates, as determined by the landlord, not on actual cost recovery. Maintenance
fees cover the cost associated with the tenants leased premises and common areas, including:
Maintenance and Cleaning: Cleaning of the common areas (including washrooms) is included in the main-
tenance fee, along with emptying of trashcans only in the tenant premises. Additional cleaning services, such
as vacuuming of tenants premises, are done once or twice a year, and are included in the maintenance fees.
Tenants do not usually arrange for additional cleaning services; however, if they do wish for extra services the
tenant pays the landlord.
Building Security: It is normal for tenants in Seoul to pay for additional security such as security devices or
unmanned security systems for the leased premises. Generally, tenants are not permitted to hire security agen-
cies separately.
Utilities: The tenant pays for the utilities below as part of the maintenance fees, not separately, unless the tenant
installs additional utility systems, such as additional cooler systems for servers, with permission, and pays the
cost. Utility costs vary according to buildings and tenants. Average utility costs of offce buildings managed by
the CBRE Seoul offce are approximately KRW 1,2001,500 /sqm. Electricity accounts for 6070% of total cost,
water 10%, and heating 2030%. Electricity costs for offce tenants are usually in the form of a fxed amount
plus a portion included in maintenance fees.
Taxes
Landlords usually pay real estate taxes. Tenants do not pay for tax increases. However, if the tenant causes additional
tax charges, the tenant pays the additional cost.
Value Added Tax (VAT): The tenant pays 10% VAT on both monthly rental and service charges.
Utilities
See discussion of utilities of maintenance fees, above.
Fit-Out
Landlord Work: Typical hand-over condition includes fnished foors (carpet tiles in Grade A space), painted
suspended ceilings with lights, plastered and painted demising walls, a built-in fre sprinkler system over the
ceiling, and a central air conditioning system.
Tenant Work: Tenants, not landlords, typically pay to ft-out the premises with internal partitions, carpeting,
blinds, curtains, telecommunication, electrical wiring, etc. Large tenants (10002300 sqm) typically need about
50 days for ft-out. Smaller tenants (below 1000 sqm) generally need about 35 days.
Fit-out Costs for Class A or Prime buildings in major cities normally range from KRW 800,0001,200,000 per
sqm, which includes construction, furniture, wiring, design fees, etc. Landlords maintain common areas and
building systems.
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Restoration
At the end of the lease, the tenant must restore the premises to its original hand-over condition, fair wear and tear
excepted. The lease contract normally addresses restoration.
No rental guarantee is typically required in Seoul Grade A offce markets, even for start-up companies.
The tenant must deposit a down payment, which is generally 1020% of total rent payable over the term of the
lease. This is held until the end of the lease, then given back to the tenant once the lease expires.
Car Parking
The tenant sometimes pays for car parking. Most buildings which include parking area in the calculation of gross rent-
able area, based on a ratio of one lot (parking space) 165330 per sqm of rentable area (i.e., one lot per 50100
pyung). For additional parking and for buildings that exclude parking in the rentable area, a monthly market rate is
charged. The average rate for Grade A offces is KRW 200,000 per month for the central business district and KRW
150,000200,000 per month for Gangnam & Yeouido business districts.
TRANSACTION COSTS
Agency Fees
Fees shown below are paid to each broker, whether a broker represents the landlord or represents the tenant, and
when separate brokers represent each party. Whoever hires the broker pays the fee shown below.
New Lease: The tenant typically pays one months gross rent excluding the deposit and maintenance fee.
Lease Renewal: The tenant pays one-half months rent.
Lease Termination: Tenants do not hire agents to negotiate termination.
Sublease: The sublessor pays one months rent, but sublease scenarios are very rare in the Seoul offce market.
Legal Fees (legal due diligence).
Physical due diligence.
General
There are no specifc lease laws governing offce leases in Seoul.
There are no set standard leases in Seoul. Offce lease agreements and their provisions are contingent upon the
building and its landlord.
Right to Sublet
Subleasing is generally prohibited, but negotiable. Some landlords allow subleasing only to affliated companies.
Option to Expand
Negotiable.
First Right of Refusal
Negotiable.
Late Delivery by Landlord by Landlord to Tenant
A landlord that fails to deliver the premises on time must pay twice the down payment.
Holdover by Tenant
The lease normally addresses holdover penalties, which are diffcult to negotiate. The tenant typically pays double
rent during the holdover period.
South Korea
Building signage and naming rights are typically negotiable only if a tenant occupies a large percentage of the
building.
Transparency
Since most foreign real estate investment has been in the offce sector, data availability and reports from companies
such as CBRE have improved. Information on comparable recent transactions in Seoul is generally available.
Grade A: High-quality (space, lobby, restrooms mechanical systems, fnishes, etc.).
Grade B: Standard quality.
PURCHASE AND SALES
Offce buildings are usually owned by institutions (either for their own occupancy or for investment), large corpora-
tions (who may or may not occupy the buildings they own), or smaller investors with deep pockets (usually for their
own occupancy).
Agency Fees
The seller pays 0.51.5% (negotiable) to seller representatives or brokers.
The buyer pays 0.82% (negotiable) to buyer representatives or brokers.
Buyers and sellers use either an agent (advisor), a brokerage frm (broker), or neither, but generally not both. An
agent acts on behalf of the client, while a brokerage frm is the intermediary between the seller and the buyer.
- In the case of agents, there is an advisory fee: In Korea, an advisor represents either the buyer or the seller
but not both parties. An advisor gets paid a pre-determined percentage of the sales price within the range
mentioned above.
- In the case of brokerage frms, the advisory fee is paid by both the buyer and seller, at a pre-determined
percentage of the sales price. This fee depends on the brokerage and type of building sold, and is negotiable.
Buyers and sellers may also pay professional advisory fees for legal due diligence, physical due diligence,
accounting due diligence, etc.).
The seller pays a capital gains tax of up to 66% if it is sold by an individual or a corporation or an institution. An
exception to this tax applies to REITS.
The buyer pays:
- Acquisition Tax: This is approximately 2% of the sales value. It includes a Local Education Tax and a Special
Tax for Rural Development.
- Registration Tax: Applies to sales, approximately 2% of the sales value in addition to Acquisition Tax.
- Mandatory bond purchase: (5% of the property price, and 2% of the land price). Property price here refers to
property value other than the value of the land. However, the buyer generally does not need these bonds, and
generally resells them in the market at a discount (known as a pre-mature resale) of approximately 13%.
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CB Richard Ellis, South Korea
Steve Y.K. Kim
Managing Director, South Korea
+822 2170 5801
steve.kim@cbrekorea.com
Andy Park
Offce Services Director
+822 2170 5817
andy.park@cbrekorea.com
About CBRE South Korea: http://www.cbrekorea.com/korea/eng/default.aspx
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CBRE OFFICE
Taipei
+886 2 2713 2266
TAIWAN
TAIWAN
CHINA
Taipei
LEASE LENGTH
Term
A typical lease term for companies of all sizes is from three to fve years. Shorter or longer lengths are possible.
Termination
An option to terminate is generally subject to a 36 month notice and 06 month penalty payment.
Renewal
No statutory right to renew exists. The Civil Code does not grant tenants renewal rights or the frst right of refusal
to renew. If a tenant wants to renew, the tenant generally must inform the landlord three to six months prior to the
expiration of the current lease.
SPACE MEASUREMENENT
Defnitions
Ping, which equals 35.58 sq. ft. and 3.305 sqm, is the unit of measurement in Taiwan.
Gross Area: The contract area for offce building leasing and acquisition in Taiwan is gross area, which is the to-
tal area measured from (and within perimeter of) the outside of external walls. It includes basement, attachment,
lift lobbies, toilets, staircases and all mechanical areas. With subdivided foors, common areas are allocated on
a pro-rata basis.
Net Area: This is the area within a tenants space, which includes columns and balconies, if any. It excludes
toilets, public corridors and lobby areas.
Effciency
A typical ratio of net area to gross area is generally 6070%. In a Class A building in Taipei, the ratio is typically
6065%. In newer buildings it can be below 60%.
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OCCUPANCY COSTS
Rent
Rent Quoted: Rent is usually quoted in Taiwan New Dollars (TWD) per ping per month, excluding service
charges, taxes and incentives.
Rent Payable: Rent is normally payable monthly in advance.
Free Rent: Free rent is negotiable. One to three months free rent during ft-out is typical for all grades of offce
buildings. Shorter or longer free rent periods are possible, depending on the size of the occupied area.
Rent Escalation: A typical three-year lease provides for rent escalation in the second or third year. A typical
fve-year lease provides for escalation from the third year. The escalation rate ranges from two to fve percent of
rent, depending on lease terms.
Service Charges
Tenants pay management charges, and the cost of repairing occupied areas.
Taxes
Value Added Tax (VAT): It is common for tenants to pay VAT. Generally, 5% VAT is levied on rental payments for
corporations. 10% VAT is levied on rental payments for individuals.
Property Taxes are included in the rent, i.e., the landlord pays them. If taxes rise, the landlord, not the tenant
normally pays increases.
Utilities
Water and electricity charges vary according to usage recorded in meters. Tenants share utility charges for common
areas on a pro-rata basis.
Fit-Out
Landlord Work: The landlord generally provides suspended ceilings, lighting and air conditioning.
Fit-out Costs: The tenant pays for all other improvements, which, in Taipei, generally cost at least 35,000 TWD
per ping (net). This includes construction but does not include furniture, telecom or design fees.
Restoration
The tenant is usually responsible for restoring space upon expiration to its original condition. The restoration clause
is stated in the lease agreement.
A security deposit of at least three months rent is generally required.
Car parking is normally not included in leases. Tenants rent parking spaces separately. Average rent for parking in
offce buildings at prime locations within Taipei City is 8,00010,000 TWD/space/month.
TRANSACTION COSTS
Agency Fees
Most landlords in Taiwan do not retain agents. The agent that represents the tenant normally receives the leasing fees
shown below.
New Lease: The agent for the tenant normally receives one-half to one months rent for the landlord plus one-
half to one months rent from the tenant, depending on the size and location of leased space. For properties
outside of Taipei City, a minimum service fee is generally required. A few landlords do not pay agency fees. If
separate brokers represent the landlord and tenant, the tenants agent receives one-half to one months rent
from the tenant only and no fee from the landlord.
Lease Renewal: The tenant typically pays one-half to one months rent or 15% of total savings based on the
landlords initial quote. A minimum service fee for small transactions is generally one-half months rent. When
Taiwan
renewing the lease, the tenant pays one-half to one months rent or 15% of savings to the agent, while the
landlord pays no fee.
Sublease: The sublessor pays one months rent. When a broker represents the sublandlord (sublessor), the
sublandlord pays one months rent to its broker. The subtenant must follow the new lease rule, which means
paying one-half to one months rent to its broker. Tenants are often prohibited from subleasing space to third
parties other than their affliate companies.
Purchases and Sales: The buyer normally pays 12% of the total transaction value of the property, but this is
negotiable, and may be a little lower depending on the total transaction value. The seller normally pays more of
the agency fee than the buyer, typically 1.54% of the total transaction value of the property, but this is nego-
tiable. Assuming the broker represents the seller and no broker represents the buyer, the broker can collect fees
from both sides. If different brokers represent the buyer and seller, then each broker collects fees from its own
client, within the range stated above.
Legal Fees
The landlord pays its attorney for lease preparation. The tenant pays its attorney.
A notary fee may be required by the landlord. Landlords and tenants often share this fee equally.
General
Civil Code: Taiwans Civil Code protects the landlord and the tenant. Examples include:
Clause 422: A lease of property for a period exceeding one year shall be executed in writing. If it is not executed
in writing, it is deemed to have been made for an indefnite period.
Clause 351: If a buyer knew at the time of concluding a contract defect of right sold, seller is not bound to
warrant such defect, unless otherwise provided by contract.
Standard leases are not commonly used in the offce property sector.
Right to Sublet
Most leasing covenants prohibit subleasing or do not address it. If the agreement does not allow subletting, the tenant
should negotiate a provision that allows the tenant to sublet to an affliate company or a subsidiary.
Option to Expand
This is typically available only for major tenants.
This is rarely addressed in the lease. The commencement date is typically subject to availability.
Holdover by Tenant
Holdover is rare but the period of holdover and penal rent are negotiable in the lease.
Signage and naming rights may be available for large occupiers.
General
Geomancy (Feng Shui): Tenants commonly consult with a geomantic professional regarding property location. Some
tenants cancel deals simply because the feng shui professional determines that the property location will bring bad
luck to the tenants business.
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Transparency
Recent comparables that identify tenants, areas, rents and incentives are generally available for Taipei.
CBRE and other real estate companies each use their own classifcation systems. CBREs classifcation of Taipei offce
buildings follows a structured grading system as provided below. The grading system considers a buildings location,
quality, leasing conditions, and building management. Under these four categories, a total of ten detailed criteria are
used to grade an offce building. A maximum of fve points is assigned for each criterion, according to the buildings
condition, summing to a maximum overall score of 50 points.
Grade A: Buildings that receive 36 points or higher are classifed as Grade A offce buildings. These buildings
normally have modern facilities with high-quality fnishes, fexible layout, large foor plates, spacious lobbies and
circulation areas, effective central air conditioning, good lift services zoned for passengers and goods deliveries,
and good management and parking facilities. They also normally have raised-foor, 24-hour emergency backup
power, a dedicated property management team, and 24-hour cooling/chilling water supply.
Grade B: Those receiving 24 points or higher and less than 36 points are classifed as Grade B offce buildings.
The Taipei Quality Offce Market includes Grade A and Grade B offce markets.
CB Richard Ellis, Taiwan
For inquires on offce leasing:
Man Chan
Associate Director
+886 2 2713 2266
man.chan@cbre.com
For market research:
Ping Lee
Assistant Manager
+886 2 2713 2266
ping.lee@cbre.com
About CBRE Taiwan: http://www.cbre.com.tw/taiwan/eng/default.aspx
For Local Market Reports: http://www.cbre.com.tw/taiwan/eng/marketreports.aspx
Taiwan
CBRE OFFICES
Bangkok
+66 2 654 1111
Phuket
+66 76 239 967
THAILAND
CHINA
INDIA
VIETNAM
THAILAND
MALAYSIA
MALAYSIA
LAOS
CAMBODIA
BURMA
(MYANMAR)
BRUNEI
BHUTAN
BANGLADESH
Phuket
Bangkok
LEASE LENGTH
Term
Lease terms in Bangkok are for three years, generally with options to renew. Longer leases are rare.
Termination
Not normally available.
Renewal
Options to renew are generally available for one or two additional terms of three years. Rent for the renewed term is
negotiable and not subject to arbitration.
SPACE MEASUREMENT
Lettable (Rentable) Area
The terms lettable and rentable are used interchangeably, and refer to the space that a tenant occupies, including
columns within the tenants space, measured in square meters. The lettable area excludes air-handling units, com-
mon areas, primary circulation (space from elevators to tenants space) and areas occupied by elevators and shafts.
Effciency
A typical ratio of carpetable area to lettable area in a Class A building in Bangkok is 9597%.
OCCUPANCY COSTS
Rent
Gross rent: Offce rent is usually on a gross basis in Baht (THB) per square meter per month. Operating costs,
including building staff, building security and management fees, are included in the gross rent. Air conditioning
during normal business hours may be included if a building has a central chiller system.
Rent-Free Period: A free rent period to cover the time spent ftting out is typically one to two months, and de-
pends on the space size and rental amount paid.
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Rent Escalation: The rent is fxed for the three-year lease term.
Costs Normally Included in Rent:
- Household Tax: Normally the landlord pays a household tax of 12.5% per year of rent. The tenant pays the tax
in some buildings.
- Parking: In Bangkok, tenants normally receive one space free of charge per 100 sqm leased. Almost every
offce building in Bangkok meets the Bangkok Metropolitan Authoritys minimum specifcation of one parking
space for every 60 sqm of rentable area.
- VAT: The tenant pays 7% VAT only on the portion of the gross rent that is allocated to services or equipment
rental. No VAT is paid on the remainder of the rental.
Operating Costs
Operating costs are included in the rent.
Taxes
The tenant deducts a withholding tax of 5% of the rent and 3% of the service from the rental stated in the lease
agreement, and pays it to the government revenue department.
Utilities
The tenant pays for electricity. The tenant pays the landlord for electricity based on consumption measured by
a meter. The landlord charges a fat rate of THB 4.55.0 per kilowatt-hour, which is usually higher than the
standard rate charged by the utility company.
Air Conditioning: If a building uses a water-cooled package system, the tenant normally pays for electricity
consumed by its package unit. If a building has a central chiller system, air conditioning during normal offce
hours (8:00am to 6:00pm on weekdays) is included in the rent. There are additional charges for the supply of
air conditioning outside normal offce hours.
Water: The tenant pays the landlord for water supply consumed in the tenants premises. Charges are based on
a meter at THB 20 per cubic meter.
Telecommunications: The landlord allows the tenant to apply directly to telephone providers, but the tenant pays
a non-refundable installation charge to the landlord.
Emergency Power: A one-time charge may apply for connection to an emergency generator.
Additional Security: Tenant pays for additional security if needed.
Fit-out
Landlord Work: Landlords normally hand over the premises with a suspended ceiling, air conditioning system,
sprinkler system, ducting and lighting, plus a fnished foor of vinyl tile or fnished concrete.
Tenant Work: The tenant pays the ft-out costs. Landlord approval is normally required.
Fit-out Costs: Total ft-out costs for Class A or Prime buildings in major cities normally range from THB 15,000 to
20,000 per sqm including construction, furniture, wiring, design fees, etc.
Restoration
At lease-end, the tenant usually must restore the premises to its original handover condition. If the landlord decides
not to require restoration, fxtures remain and belong to the landlord.
The deposit is three months gross rental; non-interest-bearing and refundable on lease expiration.
TRANSACTION COSTS
Agency Fees
New Lease: The landlord pays one months rent. If more than one broker is involved, the landlord generally pays
the agency fees, which are split between brokers, normally as agreed upon with the landlord.
Thailand
Lease Renewal: If represented by an agent, the tenant pays the agent half of one months rent or on a perfor-
mance basis, subject to a minimum amount. Landlords negotiate renewals themselves or use an agent and
normally pay their agents half a months rent.
Sublease: The sublandlord pays one months rent. If more than one broker is involved, the landlord generally still
pays any agency fees, and the brokers split the fee, normally as agreed with the sublandlord. Normally, sublet-
ting and assignment to unrelated companies are not permitted.
Purchase and Sale: The seller pays all agency fees: 3% of the sales price. Very rarely a broker represents the
buyer. However, if two or more agents are involved, the seller determines the fee split.
If the lease term is more than three years, the tenant must register the lease at the Land Department and pay registra-
tion fees (1.1% of the total rent over the lease term).
General
Leases are written in English or Thai and are governed by Thai law.
Each landlord uses its own lease form.
Right to Sublet
Subleasing is rare. Landlords normally only allow the tenant to sublease or assign its space to subsidiary companies.
Option to Expand
Options to expand are occasionally negotiable. The right of frst refusal is negotiable.
Normally no penalty applies. Additional free rent may be negotiated.
Holdover by Tenant
Landlords charge a penalty rate for holdover.
Normally a landlord allows only anchor tenants to install signage on the exterior of a building.
General
The fnal contract is normally executed after a letter of intent between the tenant and the landlord has been signed.
Transparency
For Bangkok, comparables that identify tenants, square meters, rents, and incentives for recent transactions are
available.
CBRE considers buildings in Thailand to be Grade A or B based on the criteria below:
Grade A:
- An easily divisible column-free foor plate with a regular shape and no structural encumbrances.
- An air-conditioning system with a central chiller and variable air volume, rather than a constant air volume
from a water-cooled system.
- Separate 24-hour air conditioning supply for tenants computer rooms.
- Lifts with low wait time. Lifts should be allocated to different foor zones. A separate service lift with its own
service area should also be provided.
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- The common areas, particularly the main entrance and foor lobbies, should have high-quality design, decora-
tion, and fttings.
- Interior ceiling heights should be at least 2.6 m.
- Professional building management.
- Car parking areas should have smooth and effcient entry and exit routes.
Grade B: Offce buildings of lower quality are classifed as Grade B.
CB Richard Ellis, Thailand
Nithipat Tongpun
Executive Director
+66 2 654 1111 ext. 218
nithipat.tongpun@cbre.co.th
About CBRE Thailand: http://www.cbre.co.th/en/index.asp
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Thailand
CBRE OFFICES
Hanoi
+844 220 0220
Ho Chi Minh City
+848 3 824 6125
Danang
+84 511 2222 111
VIETNAM
CHINA
VIETNAM
THAILAND
LAOS
CAMBODIA
MYANMAR
Ho Chi Minh City
Hanoi
Danang
LEASE LENGTH
Term
In Ho Chi Minh City (HCMC), lease durations typically run for two to three years. Anchor or international tenants
requiring large amounts of space have the ability to negotiate terms of fve to ten years.
In Hanoi, three- to fve-year lease terms are typical, and longer leases are negotiated in return for concessions such
as discounts or rent-free periods.
Renewal
Renewal options are negotiable.
SPACE MEASUREMENT
Defnitions
Space is measured in square meters. CBRE uses the following defnitions in Vietnam:
Gross Floor Area (GFA): All areas contained within the external walls at each foor level, excluding mechanical
and electrical service rooms, lifts, and staircases.
Net Floor Area (NLA): The space excluding all common areas such as corridors, stairs, lift lobbies, toilets and
mechanical and electrical service rooms, and generally including columns.
Effciency
The ratio of carpetable area to NLA is 95%.
The ratio of NLA to GFA is generally about 8085%, although it can be as low as 75%.
OCCUPANCY COSTS
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Rents were quoted in USD per square meter per month. Due to government mandates, landlords increasingly
quote rents in Vietnamese dong (VND). As the USD/VND exchange rate fuctuates, the true value of leases
denominated in USD becomes skewed.
Currency for Payment:
- The tenant pays rent in VND. By law, the landlord must have a VND bank account.
- If the tenant pays in USD, the bank converts the payment to VND before crediting the landlord.
- As the VND to USD exchange rate slid in 20092010, tenants with USD denominated leases bore the hidden
cost because rents quoted in USD required larger payments in VND as the dong devalued.
- Leases are being increasingly denominated in VND as government regulations require, but parties previously
ignored. This has shifted the currency risk to the landlord, and so landlords seek to protect themselves with
lease provisions whereby if the dong devalues the rent is recalculated at the then-current rate. We are seeing
the frst compromises, as some landlords insert revaluation provisions in their leases, such as, if the dong
devalues by more than 0.5%, the rental rate will adjust.
Rent Payable: Rent is usually due quarterly, including service and management fees, in advance. The VAT rate of
10% is not included, but due at the same time.
Rent-Free Periods: The length of rent-free periods is negotiable. Typically, rent-free periods are one month for
each year of the lease. This usually covers the ft-out period, although service charges and 10% VAT still apply
during this period. With current market conditions, landlords are increasingly competitive on incentives including
rent free periods.
Rent Review: Leases of longer than three years generally stipulate that parties will renegotiate rental rates every
three years. Parties manage the risk for long-term leases by agreeing to rent revisions within a pre-determined
range, usually 1015% of the base rental rate.
Service Charge
Services Covered: The service charge covers management, 24-hour security of common areas, cleaning, light-
ing, emergency power, maintenance of plant and machinery, pest control in common areas, exterior window
cleaning, garbage removal, lift services and electricity for operating the air conditioning system during normal
business hours.
Payment: The tenant pays a service charge plus 10% VAT in addition to the rent, based on the area leased,
either on a GFA or NLA basis.
Amount: The amount varies from building to building, depending upon services provided and the buildings
quality. Typical service charges are:
- Grade A: USD 58 per square meter per month.
- Grade B: USD 46 per square meter per month.
- Grade C: USD 34 per square meter per month.
Utilities
Electricity: Usually in Grade A and B buildings, the electricity (excluding air conditioning) is sub-metered and
paid to the landlord. Air conditioning during normal business hours is included in the service charge. In some
cases, electricity can be included in the service charge.
Water: The fee for water in common areas is included in the service charge. The tenant pays for water within the
tenants space. Tap water is not potable in Vietnam, so the tenant must arrange and pay for drinking water.
Telecommunications: The tenant pays for telephone and internet service directly to the service provider.
Fit-Out
Standard handover is bare-shell, i.e., concrete/screed foor with a fnished ceiling. The tenant normally pays for all
tenant improvements, such as reception, partitioning, internal doors, wiring, cabling, furniture, fooring, and ceiling
modifcation. IT Hardware and telephone systems are the responsibility of the tenant. Fit-out costs range from USD
150600/sqm.
Vietnam
Restoration
Tenants generally must restore the property to its original condition at the end of the lease term or pay its cost to the
landlord, unless otherwise negotiated.
The tenant pays a deposit based on the area leased, either on a GFA or NLA basis. A three-month security deposit
is normally payable upon signing the agreement. The landlord returns the security deposit without interest at lease
expiration. If parties extend the lease for another three years, they usually adjust the amount of the security deposit
to the new market rate.
Car Parking
Tenants typically pay extra for car parking. In HCMC, the rate is approximately USD 150 + 10% VAT per car parking
space per month for Grade A buildings. In HCMC, motorbike parking is generally USD 15 + 10% VAT per bike per
month. Depending on market conditions, landlords are increasingly competitive on incentives including parking.
In Hanoi, the fee for car parking ranges USD 80150 + 10% VAT per parking space per month, while motorbike
parking is typically USD 58 + 10% VAT per bike per month.
After-hours air conditioning, internal cleaning, and insurance.
TRANSACTION COSTS
Agency Fees
New leases: Generally in HCMC, landlords pay a fee equivalent to one month for a three-year lease, 1.5
months for a fve-year lease, or 2.75% of the lease value. In Hanoi, landlords of Grade A buildings will pay an
agency fee equivalent to 11.5 months rental, the fee is less in Grade B & C buildings.
New leases with an agent representing the tenant: Tenant pays an amount equivalent to one months rental
across all grades.
Both parties share legal fees, stamp duty, and other incidentals involved in the preparation and execution of the lease.
General
None.
Standard Lease
Landlord or agent provides the draft lease agreement, usually containing standard terms and conditions.
Right to Sublet
Subletting is done on a case-by-case basis, but requires help by the landlord if the tenant doesnt have subletting
within their business license.
Option to Expand
Negotiable.
Tenants can negotiate in their lease agreement for the right of frst refusal to lease additional space on the same or
contiguous foor(s) on the same terms and conditions contained in a bona fde third-party offer to lease, with 15 days
to match any third-party offer. Usually negotiated on a case-by-case basis.
Late delivery is negotiable and should be addressed in the lease, with a subsequent penalty.
Holdover by Tenant
Holdover by tenant is negotiable and should be addressed in the lease.
Vietnam
247
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Depending on market conditions, landlords are increasingly competitive on incentives including discounted signage.
In Hanoi signage is rare, but may become more competitive as supply increases.
Transparency
Comparables are generally available for recent transactions in Ho Chi Minh City and Hanoi. Terms and conditions of
lease agreements are confdential between the landlord, their agents, and the tenant and are not disclosed to another
party without the prior consent of either party. Therefore, landlords will provide the basic details of comparable leases
with rents and lease lengths. Some detail on incentives may be provided.
Although no formal classifcation system exists, these grades are generally understood:
Grade A Buildings: High-rise buildings, located within the CBD, column-free foor plates of over 1000 sqm,
ceiling heights of 2.75 m, professional management, M&E design, effciency, lift lobby, access.
Grade B Buildings: Generally 75% of Grade A amenities, as well as being located in the CBD or periphery with
at least seven stories and foor plates of 5001000 sqm.
Grade C Buildings: Due to the immature nature of Vietnams offce market, Grade C buildings are classifed as
buildings not meeting Grade A or B status, but having 50% of the amenities of Grade B buildings, with minimum
foor plates of 150 sqm.
CB Richard Ellis, Vietnam
Rudolf Hever
Associate Director of Research and Consulting
+848 3 824 6125
rudolf.hever@cbre.com
About CBRE Vietnam: http://www.cbrevietnam.com/
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Vietnam
Raymond Torto, Ph.D., CRE
, Co-Chair
Global Chief Economist and
Executive Managing Director, Global Research
+617 912 5225
raymond.torto@cbre.com

Karen Ellzey, Co-Chair
Global Corporate Services
+617 869 6154
karen.ellzey@cbre.com
Nick Axford
Head of Research, Asia Pacifc
Senior Managing Director, Global Research
+852 2820 8198
nick.axford@cbre.com
Jim Costello
Principal and Director of Investment Strategy,
Econometric Advisors
+617 912 5236
jim.costello@cbre.com
Peter Damesick
EMEA Chief Economist
+44 20 7182 3163
peter.damesick@cbre.com
Michael Haddock
Director, EMEA Research
+44 20 7182 3274
michael.haddock@cbre.com
Richard Holberton
Director, EMEA Research
+44 20 7182 3348
richard.holberton@cbre.com
Neville Moss
Head of EMEA Retail Research
+44 20 7182 3183
neville.moss@cbre.com
Andrew Ness
Executive Director,
Asia Pacifc Research
+852 2820 2845
andrew.ness@cbre.com
Jon Southard
Principal and Director of Forecasting,
Econometric Advisors
+617 912 5228
jon.southard@cbre.com
Kevin Stanley
Director, Global Research and Consulting,
Asia Pacifc Research
+61 029 333 3490
kevin.stanley@cbre.com.au
Raymond Wong
Executive Director, Americas Research Operations,
Americas Research
+416 815 2353
raymond.wong@cbre.com
Global Research and Consulting is a CB Richard Ellis network of preeminent researchers and consultants who
provide real estate market research, econometric forecasting, and consulting solutions to our clients worldwide.
CBRE GLOBAL RESEARCH AND CONSULTING EXECUTIVE COMMITTEE
RESEARCH MEMBERSHIP
CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the worlds largest commercial real estate services
frm (in terms of 2010 revenue). The Company has approximately 31,000 employees (excluding affliates), and serves real estate owners, investors and occupiers
through more than 300 offces (excluding affliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate
services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and
consulting. Please visit our Web site at www.cbre.com.
2011 CB Richard Ellis, Inc. Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verifed it and
make no guarantee, warranty or representation about it. It is your responsibility to independently confrm its accuracy and completeness. Any projections, opinions,
assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use
by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis.
www.cbre.com

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