What is a Lease Incentive?

A lease incentive is an inducement for a lessee to sign a lease. In these arrangements, either the lessor directly pays for expenditures, or the lessee does so and is then reimbursed by the lessor. A lessor enters into these arrangements in order to fill vacant office space. Such deals are especially common in a soft real estate market, or when a lessor wants to attract a high-profile, stable prospective tenant.

Example of a Lease Incentive

A lessor wants to attract a stable new tenant to its office building. To do so, it may offer to take over the remaining payments on the lessee’s existing lease, pay its moving costs, or make a cash payment to the lessee.