Renting a new or relocated office for your new or expanding business is a long-term commitment to you, your employee and your customer. It is a complex and time-consuming exercise that requires a well-planned timeline from requirements identification to the completion of decoration works and moving in. Here’s a detailed guide to walk you through the whole process.
1. Identify your requirements
How much space you need
Before everything starts, you need to know exactly how much space you require on net area basis for your business, that is, for you, for your existing staff and projected hirings, for your visitors or clients and for your desired facilities like pantry, reception, server room or even gym room, baby caring room, etc. Space requirement varies very much by industry. For instance, solicitors at a law firm working independently on confidential cases and meeting clients in their office may need more private rooms than a software house which members have to work collaboratively on creative projects. With the trending of flexible and open-workplace working model in the past decade, the average office space per person has been shrinking. You may weigh the benefits of an open-space office and make sure the private offices to open space ratio is designed in a way that supports staff requirements for collaborative and quiet works. Here are some rough industrial standards for estimating the average space per person.
Where should it be located
Hong Kong is one of the largest business hubs for local and multinational companies. There are abundant offices of different grades in different business districts to choose from. Here’s a closer look at each grading.
Grade 3A (Triple A)
There are only few buildings falling into this best-in-class category. They are all modern and impressive skyscrapers in premier locations of main business districts with exotic lobby, large floor plate of more than 20,000 sq.ft., intelligent lift service system, high-end finishes, smart gate control system and abundant car parking facilities. All these buildings, except The Centre which has been stratified for sale in 2018, are owned by single landlord or few portfolio landlords which can guarantee professional management and consistent tenant mix policy. They are the most expensive offices in the world that can reflect superiority and are occupied by renowned multi-national companies and financial institutions. If prestige worth much in your industry, here maybe your right fit:
Grade 2A (Double A)
Grade A+ buildings are those modern buildings just similar to those triple A buildings. They have also grand building outlook inside out but smaller in scale with around 10,000 to 20,000 sq.ft. floor plate. Most of them are single-titled or owned by few portfolio landlords which ensures effective property management and building maintenance. These buildings spread across CBD and decentralized business districts in Hong Kong and provide prestigious address for wider range of companies other than just the most profitable financial institutions. Some buildings in this class are listed below.
Grade A buildings are also impressive buildings with spacious lobby and floor plate ranging from 6,000 to 20,000 sq.ft.. Some of them are retired from Grade AA due to aging of facilities or after stratified sale which may lead to some degree of adverse effect on the quality of building maintenance and tenant mixture. Buildings in this class include:
Grade A Offices For Lease
Grade B+ buildings are those newer and modern buildings with few thousand square feet floor plate hence typically average lobby size, adequate common facilities of having few cabins per each lavatory, and sufficient number of passenger and service lifts. It is a step down from the prestigious class found in Grade A space but offers average rental level which appeals to the largest number of businesses.
Grade B buildings are those small but new and modern buildings with limited common facilities like small lobby with one man guard, and two single-cabin lavatories per floor. They also include those buildings downgraded from Grade B+ buildings due to depreciating building facilities and quality over time.
Grade C buildings refer to those small and old buildings with outdated infrastructure and rough finishes which requires massive maintenance or renovation. It has limited common facilities like small lobby with one man guard, two single-cabin lavatories per floor, and has no car parking facility. Rentals of these buildings are generally cheap but with many exceptions. Many of these buildings in Hong Kong are located in prime and crowded area providing a perfect place for semi-retail businesses like beauty salon, bar, upstairs restaurant, hair salon, gym room, clinic, etc. Nevertheless, these offices could be a safe choice for the scrappy founders of a new company to get start or for companies to use it as a back office.
What is your budget
Renting an office is a long-time commitment that requires a solid budget plan to avoid any miscalculation leading to negative effect on P & L. It is not just about the rent, but the total occupation cost including a variety of expenses such as management fee, security deposit, insurance, decoration, moving and reinstatement. To make your budget sensible, preliminary research on the web is helpful for getting a solid sense of what such price range are in the market. To make life easier, you may just call up a trusted real estate agent for all sort of real-time data at glance.
Decoration cost is one of the key elements in budgeting. Despite office rents have seen a downward trend in recent years in Hong Kong, inflation and shortage of construction workers have been keeping decoration cost at sky-high level that can account for up to 30% of the total occupation cost after amortization over, says, a two-years lease term.
To save up this huge decoration cost, an insightful real estate agent with full coverage of market stock may help you to find something fully fitted that may require just minor alternation for matching your layout requirement.
In additions, tenant may consider adopting the trending open-workplace model which may greatly reduce the need for massive construction works if the premises in concern has plug and play provisions from the landlord such as full false ceiling system. Minor alternation means also shorter double rent construction period for relocation scenario, and fewer reinstatement works to be done upon lease expiry. At last, picking up ready-to-go office space or flexible co-working spaces in business centre may save all renovation costs, and allow for immediate occupation. The rents for these flexible workplaces are calculated per workspace, usually defined as a private desk with basic fittings and amenities plans regarding internet connection, meeting room usage, photocopying, and reception services. Its rate for 2-3 workstations is around HK$20,000 to HK$35,000 in Central’s grade A buildings and HK$15,000 outside Central.
When do you need to move in
The date of taking over the premises should be well-planned so that it can allow adequate time for the landlord’s approval of works, decoration, reinstatement and moving in. Bear in mind that some sessional factors, for example, Lunar New Year holiday, and the bureaucracy practice of some big landlords or management companies may possibly delay the vetting and construction process, and they must be fully considered when estimating the completion time of construction works. Depending on the complexity of your decoration, a well-planned decoration project by a respectful decoration firm may generally take up 1.5-2.5 months for decorating a 3000-6000 sq.ft. office and an extra half to one month for the reinstatement works.
2. Setup clear timeline
After having all your requirements set, a detailed timeline with clear milestones and critical dates must be drawn up for managing the whole process from start to completion. For a renew vs relocation scenario, the process may better start 6 to 12 months before the expiry of the lease as getting the best leveraged terms from the existing landlord may take some time. Below is an example of the timeline of renting a new office.
3. Go direct or hire a real estate agent
With the advance of multimedia technologies, you may simply filter out your potential spaces more efficiently, transparently and comprehensively by previewing the unit photos, floor plans, videos or VR files on the web. Though more time consuming, digging out the right landlord’s contact of a single ownership building for an enquiry call is just a few keyboard’s works. But why the market still sees a lot of companies, having very good relationship with the landlord, when coming to the time of lease renewal, would choose to ask for agent’s intervention, and needless to say when it comes to an office relocation. What is the magic and charm of a real estate agent that can make his living in this age of information transparency? Answer is simply. It is not just the matter of how much wider stock coverage they have but their experience and knowledge in the market that you can leverage for a much better deal at a much lower risk.
Here’s how a leasing expert can help you get the best deal and avoid huge mistakes when leasing an office space
Save you time
A great agent with full market coverage can narrow down your targeted list and in sometimes bring you back from unrealistic expectation by just a guesswork, saving you precious time. He is not a tourist guide taking you from south to north for spaces of no values but your real targets in according to your real needs that even you may not fully realize by yourself.
Knowing the real quote
Terms of a commercial lease can be quite complicated. Terms like rent free, license period, rent review, sales and redevelopment clause, reinstatement clause, sublet right, fit-out subsides, first right of refusal, etc. may be strange to a new tenant that just a quoted rental on the vacancy schedule of a building will not tell the full picture. By using a decent agent who knows the stock can get you understand the real packages that is crucial for the subsequent formation of the negotiation strategies in the context of the general offerings in the market.
Strengthen your negotiation stand
Negotiation is about Leveraging. No matter it is a renewal or a new lease negotiation, you have a Say only when you have a card. A venerable agent is the one who can help you to lead the negotiation rhythm by leveraging the alternative market offerings (real or unreal). Even the leverage is an unreal incentive-inflated market offerings, its screen smoke effect can cause a dramatic improvement on the achieved final terms. From landlord’s angle, agent means market alternatives and alternatives means rental competition. From tenant’s point of view, agent means rental discount and great agent means great rental discount.
Minimize your risk of committing huge mistakes
Commercial leasing involves many procedures, timelines and professionals. Agent is playing his part as a project manager to liase different things and parties at every stage hence avoiding deal fallen through due to missing timeline.
Tenancy agreement is generally complicated with terms sometimes unfavorable to the tenant. A reliable agent can warn you the possible tricks and devils until it’s too late, for example, the widespread redevelopment news of a particular building you choose which contract has a Sales and Redevelopment Clause. An experience leasing expert knows exactly how a properly structured tenancy agreement looks like and can inform you in advance of any abnormality before your signing.
4. Tour the site
Touring sites can be an exhausting experience especially during hot summer and rainy days. Today’s technology has helped us a lot in enabling site preview over our desktop via VR and pictures so we can eliminate immediately those unfit options. Don’t treat yourself a tourist for unnecessary tours but put your focus on those well-suited to your business needs.
Before site visit, always prepare a checklist of your set of requirements that have to be met by any of your inspected space. A floor plan of the inspected space is a must to bring along for the perspective on the space.
5. Negotiate contract terms for signing
Once identified the ideal spaces, discuss with your agent to formulate an effective negotiation tactics for the best possible terms in the context of your requirements and the market condition including the vacancy level and the availabilities of similar options. Negotiate the second-best option simultaneously can provide an effective leverage for the negotiation of the others. For how to negotiate the basic contract terms of a commercial lease, click here for detailed guide.
6. Engage with interior designer or renovation contractor
Renovating an office is a complicated process. It is better to start the game as soon as you start your site touring or you may end up paying rent for months without the construction works started after the hand-over of the site.
Depending on your budget and the extend of renovation work to be done, you may choose to engage with an interior designer or a renovation contractor. If your selected office requires just a minor fixes or some new fixtures, you probably would not want to pay extra for an interior designer. A renovation contractor may work. However, if you are going to do a major renovation, don’t overestimate your ability and time to handle the whole project which really requires skills and expertise to advise on the design part, to get approval on all plans from the landlord, to liase and co-ordinate with numerious of nominated and non-nominated contractors, to schedule different part of works, to spot and tackle progress bottlenecks, to monitor and control the deliverables’ quality, to shop furniture and fitting, and most importantly to hand back the place to you on time.
No matter it is a renovation contractor or an interior designer, be avoid renovation scams by engaging with bad and non-trustworthy interior design companies. Always get accreditation check and avoid paying a penny before signing anything. Get word-of-month referral from friends and compare different quotations for revealing anything which is too good to be true. Ask for the progress report to make sure everything on the right track.