Leasing in Bangladesh: Context
Commercial leasing in Bangladesh operates differently from mature markets. Lease terms are shorter, landlord obligations more limited, tenant protections weaker, and the building stock older. Understanding what's negotiable, what's standard, and when to walk away is essential for making good leasing decisions.
Leasing Scenarios Compared
| Scenario | What You Get | Typical In | Pros | Cons |
|---|---|---|---|---|
| Single-Tenant Building | Entire building, full control | Factory, large office, warehouse | Maximum control over security, maintenance, branding | Higher cost, all maintenance responsibility |
| Multi-Tenant Floor | One or more floors in shared building | Grade A-B office buildings | Shared infrastructure costs, professional management | Shared exits, limited control over common areas |
| Serviced Office | Ready-to-use with furniture, services | Business centres (Regus, WeWork-style) | Zero CAPEX, flexible terms, rapid setup | Higher per-seat cost, limited customisation |
| Shell and Core | Bare structure, tenant does all fit-out | New buildings, industrial | Design to your specification | High CAPEX, long fit-out timeline |
| Fitted/Turnkey | Previous tenant's fit-out included | Grade B-C offices | Low CAPEX, fast occupancy | Layout may not suit, condition varies |
Lease Terms — What's Standard vs Negotiable
| Term | Dhaka Standard | MNC Requirement | Negotiable? | Strategy |
|---|---|---|---|---|
| Duration | 1-3 years | 5+5 years with renewal option | Yes | Offer longer commitment in exchange for rate lock and fit-out period |
| Advance | 3-6 months advance + 3 months security | 2 months advance + 2 months security | Partially | Negotiate down with strong tenant profile. Bank guarantee acceptable. |
| Rent Escalation | 10-15% annually | 5-7% fixed or CPI-linked | Yes | Fix escalation rate in lease. Never accept "as per market". |
| Fit-out Period | Not offered | 2-3 months rent-free | Yes | Standard for MNC tenants in Grade A. Negotiate based on fit-out scope. |
| Maintenance | Tenant responsible for everything | Landlord: structure, roof, common areas. Tenant: interior. | Yes | Clear matrix in lease. Never accept "tenant maintains all". |
| Service Charge | Inclusive or separate (varies) | Itemised, auditable, capped annual increase | Partially | Request breakdown. Cap increases at CPI + 2%. |
| Termination | Lock-in period, 3 months' notice | 6-month break clause after Year 3 | Yes | Essential for MNC. Offer penalty (3 months' rent) for early exit. |
| Sub-letting | Usually prohibited | Permitted with landlord consent (not unreasonably withheld) | Yes | Important for flexibility. Include in lease. |
| Reinstatement | Remove all fit-out at lease end | Fair wear and tear accepted | Yes | Negotiate "as-is" return or capped reinstatement cost. |
| Insurance | Not required | Building insurance (landlord), contents + liability (tenant) | Partially | Verify landlord has building insurance. Most don't. |
Red Lines — When to Walk Away
| Red Line | Why It's Fatal | No Negotiation |
|---|---|---|
| Single staircase (high-rise) | Life safety — cannot evacuate in fire | Walk away |
| No structural drawings / pre-1993 unknown design | Cannot verify structural adequacy | Walk away unless willing to fund assessment |
| Flood history (ground floor) with no mitigation | Will flood again — contents loss, business interruption | Walk away or upper floors only |
| No generator backup where power outages >2hr/day | Business continuity failure | Walk away or landlord installs generator |
| No written lease agreement | Zero legal protection | Insist on registered lease agreement |
| Advance >12 months | Cash flow risk, landlord financial distress signal | Maximum 6 months total deposit |
| Rent escalation "as per market" | Unlimited exposure | Fixed percentage or CPI-linked only |
Pre-Lease Due Diligence Checklist
- Ownership verification — title deed, mutation certificate. Is the landlord the actual owner?
- RAJUK approval — is the building approved for this occupancy type?
- Fire licence — valid FSCD licence for commercial occupancy?
- Structural assessment — at minimum, visual inspection. For >4 storeys, commission RVS.
- Electrical audit — panel condition, earthing test, generator test run.
- Flood history — ask multiple sources (guard, neighbours, local shops).
- Building insurance — does the landlord have building insurance? (Usually no.)
- Service charge audit — what's included? What's the history of increases?
- Other tenants — who else is in the building? Any hazardous or incompatible uses?
- Landlord reputation — track record with other tenants, maintenance responsiveness.
Negotiation Leverage Points
- Gap register — documented safety/compliance gaps give you leverage to request landlord remediation or rent reduction.
- Tenant profile — MNC tenants are highly desirable. Use your brand and reliable payment history.
- Long-term commitment — offering 5+ years gives landlord certainty. Exchange for fit-out period and rate lock.
- Fit-out investment — significant tenant investment in fit-out demonstrates commitment and justifies better terms.
- Market timing — vacancy rates vary. High vacancy = tenant's market.
References
- RICS — Commercial Lease Standards
- CoreNet Global — Corporate Real Estate
- Bangladesh Tenancy Act 1938 (as amended)
- Transfer of Property Act 1882
- BNBC 2020 — Occupancy Requirements
Insights & Guidance
- Bangladesh leasing norms differ significantly from mature markets — shorter terms, higher advances, less landlord obligation.
- MNCs should push for 5+5 year terms, fixed escalation (5-7%), fit-out period, break clause, and clear maintenance matrix.
- Red lines: single staircase in high-rise, no structural information, flood history, no generator, verbal-only lease, advance >12 months.
- Gap register is your best negotiation tool — documented safety gaps justify landlord remediation or rent reduction.
- MNC tenant profile is leverage — landlords want reliable, long-term, reputation-enhancing tenants.
A bad lease locks you into an unsuitable building for years. Understanding what's negotiable, what's standard, and what's a red line prevents expensive mistakes and gives you a framework for professional negotiation.
- Verbal agreements — unwritten terms are unenforceable.
- Uncapped escalation — "market rate" increases can make a space unaffordable.
- No termination clause — locked into a building you need to leave.
- Signed lease agreement with all terms documented
- Pre-lease technical inspection report
- Landlord ownership verification
- Gap register with agreed remediation responsibilities
- How well does the landlord maintain the common areas?
- Are other tenants satisfied? Ask them directly.
- Is the building management office responsive and professional?
- What is the standard lease term and renewal process?
- Is rent escalation fixed or "as per market"?
- What maintenance is landlord responsibility vs tenant?
- Is there a fit-out period or incentive for long-term commitment?
- Lease review — commercial property lawyer with Bangladesh experience.
- Market benchmarking — real estate advisory (CBRE, JLL, Bproperty).
- Fit-out cost estimation — interior fit-out contractor.