IBM Philippines: Exploring Bundled Renewal For Its Buildings

IBM Philippines leased offices in UP Ayala (UPA) Technohub's Buildings E, J, and M. The contracts for these would expire in December 2017, March 2018, and March 2020, respectively.

IBM initially planned to renew its leases separately. However, Building E's negotiations created an opportunity for a bundle renewal. This option did present some challenges though. The landlord required an early renewal of a lease expiring two years down the road.

To lower rental rates and get favorable terms, IBM approached Cushman & Wakefield for advice.

UPA Technohub's lease renewals were subject to a cap and collar of year one's base rent renewal at no less or more than 10% of year five's current base rent. From this, the landlord was already offering a base renewal rent that is 6% lower than Building E's expiry rent. However, we still explored a bulk renewal to push for better prices and terms.

For IBM's review of options and related costs, our team prepared 10 scenarios, including, among many others:

• Separate renewals upon expiry
• Bundle renewal for full five years
• Bundle renewal with the same expiry date

IBM got a bulk renewal that is 15% lower than all its leases' average expiry rents. IBM enjoyed lower rates from the early renewal. It closed a deal that is lower than the market's yearly increase of 3% to 5% and better than the yearly standard increase of 5% to 10%.