PRICING A GROUND LEASE

Client: Juan, how do you price a land lease?

JPRE: What exactly is being leased?

Client: It’s a portion of land inside a larger commercial compound we developed in XXX. There’s already an existing commercial building in the compound, but this specific tenant wants to lease an undeveloped section and construct their own structure. How should we price it?

JPRE: There isn’t a single, market-standard formula for pricing land leases like this. Unlike condos or office spaces, where you can easily benchmark published rates, ground leases inside private compounds are more nuanced. You have to triangulate.

A practical way to approach it:

1. Start with improved property benchmarks.

In CBDs, condominium or commercial spaces can lease for roughly Php600–Php1,000/sqm/month, sometimes higher depending on location and quality.

2. Look at industrial/warehouse rates.

Warehouses typically range around Php200–Php600/sqm/month, depending on specs and accessibility.

3. Consider raw land.

Truly raw or agricultural land—without utilities, roads, or infrastructure—will naturally command much lower rates than warehouse space.

But your situation isn’t raw land.

It’s inside a developed commercial compound. There are likely roads, utilities, security, access control, and an established business environment. That embedded value matters.

So in practice, I would treat it closer to an industrial/warehouse benchmark rather than agricultural land—because the tenant is benefiting from existing infrastructure and location advantages.

A working range of Php200–Php600 per sqm per month is reasonable as an initial anchor, then adjust based on:

+ Location within the compound (prime frontage vs. interior lot)

+ Exclusivity or scarcity

+ Tenant profile and term length

+ Escalation clauses and lease tenure

Longer terms (e.g., 10–20 years) may justify slightly lower rates in exchange for stability. Shorter terms should command a premium.

At the end of the day, ground lease pricing is less about a fixed formula and more about positioning: What is the value of being inside your ecosystem? That’s where the real leverage is.

My two cents.