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A warehouse lease: finding the walk-away point
You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.
Case timer
00:00
1. Read the prompt aloud
Read it slowly, then pause. Let the candidate ask questions before they structure.
A Singapore food distributor must renew its warehouse lease; the landlord asks SGD 1.2 million a year. Find its walk-away rent and the room for a deal.
Format note: The rent today is SGD 1 million a year on a three-year lease. The best alternative is another warehouse at SGD 0.95 million a year, plus SGD 0.3 million to move and about SGD 0.15 million of lost sales during two weeks of disruption. If the distributor leaves, the landlord expects the space to stand empty for six months, then to let it at SGD 1.2 million a year. All figures are illustrative.
2. Answers to clarifying questions
This case has no scripted clarifying answers. Answer from the prompt, and say "assume what you think is reasonable" if the prompt does not cover it.
3. A model structure
Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.
- What is the most we should pay, and the least the landlord should take?
- Our alternative: the other warehouse, with one-off costs spread over the lease
- The landlord's alternative: an empty building, then a new tenant
- Options that give each side what it values most
4. The working, step by step
Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.
Step 1: One-off costs per year
What a strong candidate does: Moving and disruption, spread over a three-year lease, in SGD millions.
One-off costs per year (SGD millions): (0.3 + 0.15) ÷ 3 = 0.15
Step 2: Our walk-away rent
What a strong candidate does: The other warehouse's rent plus the one-off costs per year: above this, moving is better.
Walk-away rent (SGD millions a year): 0.95 + 0.15 = 1.1
Step 3: The landlord's alternative
What a strong candidate does: Over the same three years: six months empty, then two and a half years at SGD 1.2 million.
Landlord rent over three years without us (SGD millions): 1.2 × 2.5 = 3
Step 4: The landlord's walk-away rent
What a strong candidate does: The same total, as a yearly rent from us.
Landlord walk-away rent (SGD millions a year): 3 ÷ 3 = 1
Step 5: Room for a deal
What a strong candidate does: Between the landlord's minimum and our maximum.
Width of the room for a deal (SGD millions a year): 1.1 - 1 = 0.1
The recommendation to listen for
At the end, say: "The CEO walks in. What is your recommendation?"
Offer to renew at about SGD 1 million a year and walk away above SGD 1.1 million: beyond that, moving to the other warehouse is cheaper even after SGD 0.45 million of moving and disruption costs. The landlord should accept anything above about SGD 1 million, because six empty months would cost it as much. To close the gap, offer what the landlord values most, a five-year lease instead of three, in return for the lower rent. The risk is that the landlord has another tenant lined up, so check the local market before the first meeting.
Risks a strong answer names: The landlord may already have another tenant, which would raise its walk-away rent.
Next steps: Check asking rents and empty space nearby; Get a written quote for the other warehouse.
Score the candidate
Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.
This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?
Total
0 out of 25
Score all five criteria to see the band and the feedback template.