A guide to pre-lets

What is a pre-let?

A pre-let is a contract between a potential tenant and a commercial property developer which allows the tenant to agree to lease a building before the construction has started. Most likely to occur when there is a shortage of commercial property buildings on the market, entering into a pre-let holds both pros and cons for the parties that are involved.

Reasons why tenants enter into a pre-let agreement

Pre-lets are usually favoured when a tenant can no longer find a suitable property in their search area. The advantage of pre-letting an off-the-plan build is that it may allow the occupier to have some influence over the build design, therefore creating a space tailored to their business’ needs. Businesses may also turn to pre-lets as they are typically cheaper to lease than an already existing property. Pre-lets sometimes include agreements for discounted or rent-free periods.

Tenants that tend to benefit from a pre-let are usually the larger, more influential businesses. These types of organisations generally have the ability to commit to a longer leasehold that a pre-let building requires. However if a tenant is already bound into an existing lease, the tenant cannot enter into a pre-let unless there is a break or expiry in the lease.