A rookie’s guide to renting a commercial office
When you’re considering renting a commercial office, there are a number of factors to be taken into account.
Here are five key tips to keep in mind:
1. Location, location, location
Ideally, your office should be accessible and central to your clients. If you’re far from your client base this will no doubt act as a deterrent when it’s time for them to come in for a meeting or catch up. And if you’ve just spent a large amount of money setting up a new office with the idea in mind that it will be customer facing, it may well have been in vain.
If you’re far from your client base this will act as a deterrent when it’s time for a meeting or catch up.
The same can be said for your staff and the choice of location. An important consideration is proximity to public transport. It’s highly advisable to be on or close to a train or bus line. This will also help when attracting quality staff. If your office is off the beaten track then it will make it harder to appeal as well as and retain the right people for your business.
2. Does size matter?
Size is determined on a few elements, mainly the number of staff you have. The current industry rule of thumb is approximately 10 sqm per person.
This number takes into account a small reception, small meeting room and utilities. Therefore if you have 10 staff it’s likely you’ll require approximately 100 sqm. There are, of course, exceptions to this. If you have large boardrooms, breakout areas, multiple offices, kitchens etc then your size requirement will increase. And you might have a newer type of workspace that doesn’t adopt a conventional layout.
Read more: Tips for buying: office, retail, industrial
3. Money talks when renting an office
When searching for an office, you must ask yourself the hard question, and answer it realistically: “How much can I pay on rent?”
The main components that decide price are location, building quality and natural light/outlook. Generally the closer you are to public transport the higher the rent.
Components that decide price are location, building quality and natural light/outlook.
A building that is modern and up-to-date with facilities (lifts, services, air-conditioning etc) will cost more than an older building with tired facilities. The exception here is an older heritage style building that has had a substantial refurbishment. Here it gives the building a point of difference, and these buildings have a strong following by creative tenants.
Natural light is often one of the major factors considered by inquiries, along with a pleasant outlook. Buildings with good natural light and outlook are more expensive, and if they receive park or harbour views they can escalate even more.
4. In the beginning … are set-up costs
The fourth are set-up costs. You will have a number of setup costs to budget when leasing an office.
All owners require a bank guarantee for security over the space. This is generally around six months rent for a three-year commitment. In some cases this may be reduced if you supply sufficient financials to confirm to the owner that you have a solid business and are a ‘good risk’.
As a guide, legal fees generally cost between $1000 and $2500. For insurance, you will require public liability insurance of at least $20 million, as well as business and general insurance. Rents are paid monthly in advance, so this will need to be paid at lease commencement.
5. What’s in it for you?
The last and most favourable for tenants are lease incentives.
Landlords will offer tenants incentives to entice them to lease their offices. Incentives are generally on a case-by-case basis, and are dependent on many factors such as lease term, type of business, vacancy in the particular building etc. The larger the office, the larger the incentive is usually how it works.
Landlords will offer tenants incentives to entice them to lease their offices.
If the office has a nice fit-out in place then the incentive will be lower, and vice versa if there is high vacancy. If incentives are strong, institutional owners may offer at least a 20% discount on the term’s rental, this can escalate to 30% in some cases.
Smaller owners usually offer 10% however their grade of building is usually B and below. Incentives are generally offered as rent abatement over the term of the lease, effectively reducing the monthly rent by the percentage negotiated, and in some cases fit-out contribution is also offered.
In a nutshell…
Renting an office space shouldn’t be hard. If you follow the above steps, use common sense and give yourself enough time, the lease process should be an easy one.
Unlike the residential world, commercial agents are able to show you every available office space for lease, even if it’s not directly listed by their agency.
Find an agent you like and trust and let them put all of the available options to you. All you have to do then is make a decision.
Read more: How to choose the right commercial property