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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Pre-let (agreement for lease)

What is a pre-let, and why does a development lender want one?

ONE OF 366 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A pre-let is a lease agreed with a tenant before a commercial building is built or finished, usually as an agreement for lease under which the tenant must take the lease once the building reaches practical completion. For a development lender it does for an office, warehouse or shop what presales do for apartments: it fixes part of the income before the money is spent, supports the completed value, and makes the investment loan that repays the development loan easier to raise. The desk reads the tenant's covenant, the length of the lease, and the tenant's rights to walk away if completion is late.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// WHAT IT IS NOT

Presales are contracts to buy units in a development; a pre-let is a contract to lease space in it. Both are agreed before completion, and both are only as good as the counterparty and the conditions.

// WORKED IN

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