Rental Valuations with Inducements: An Update

Abstract

Over the past two years, the use of rental inducements has increased in response to a softening leasing market for office space. The methods to employ for analysing the induced rentals have been uncertain. However, owing to a number of recently contested arbitrations, methodologies are now being applied which are gaining general acceptance. Despite this, not all of the issues have gained total unanimity and require further analysis. These include: (1) the treatment of tax; (2) the treatment of the benefit arising from an unratched lease; and (3) the quanitifying of indirect inducements. The resolution of these issues is essential to achieve a fully equitable rental assessment. These issues are discussed and methodologies suggested to address them. In future the need to deal with such issues may subside as a result of the growing trend towards lower stated rentals and away from the use of inducements.