You have walked & seen tens & tens of office spaces and are totally exhausted. You swear in your heart you won’t want to view another office unit anymore. You have no choice as time is running out and your boss keeps rejecting those that you have shortlisted.
Problem is, you still cannot find the right office premises for your company’s relocation.
Getting to rent the right office space is definitely not a walk in the park. It’s rarely as simple as a “one-man” decision-making situation by the boss when choosing an ideal office.
Especially with a big corporation, it can be a painstaking or laborious decision-making process as it requires huge amount of time, planning and effort.
Worst is, just before you enter into an agreement to finally book an office of your choice, your company is rejected by the Landlord or the relevant authorities. After wasting so much time & effort and going through many emotional roller coaster rides.
The above may not happen to you but we have encountered & helped many tenants in these dilemmas. You see, there are many hidden issues that can throw you off guard. So here are on-the-ground experiences of the:
Top 5 Common Mistakes Company Must Avoid
When Renting An Office.
1) Wrong zoning.
Just the other day a company lamented that the Urban Redevelopment Authority of Singapore (URA) had served them a notice to vacate their office with a penalty fine.
You see, this training academy company was not supposed to rent their office space in a Hi-Tech Park Industrial Building. Sadly their Landlord thought it was alright at first and because of the soft leasing market condition, he rented them the office space out of desperation.
This could have been prevented if an experienced commercial property consultant had stopped the company by advising them the proper zone usage of the location.
To our surprise, when they are “hunting” for another space, their property consultant had brought them to view yet another modern industrial building not zoned for their operation.
The moral of the story? Check with the relevant authority and don’t just take the Landlord’s word for it. Or get an experienced commercial agent to advise you as he or she would know the proper zoning for commercial space usage.
2) Prevention is better than Cure
Lots of tenants have encountered ‘disruptions’ during their tenancy period before. Collective en-bloc sales, redevelopment & asset enhancement of the building, URA notice to vacate the premises are some undesirable disturbances.
However, all these are mandatory clauses stated in your tenancy that cover the above occurrences, which cannot be removed.
Some landlords even have their own valid restrictions as to which business operation is prohibited on the premises even though it complies with the appropriate zoning.
Examples are Pre-school education, religious association or society, operation with a heavy flow of crowd accessing the office building etc. Many times, we have heard our client’s frustration of being rejected by either one of the above reasons.
In the case of a building going for redevelopment, many landlords would have the plan to do so. The good news is, this upgrading would require a very long 2 to 4 years period of planning before they initiate the clause to vacate the tenants.
So instead of totally ruling out renting an office in this building, this can be suitable for companies requiring short term leasing. The key is to determine which stage the redevelopment is at. For more info on this, please contact us.
Hence, a pre-knowledge of the above is vital before signing the tenancy. This would ensure a smooth running of your operation without any unnecessary disruptions.
We have good “insiders” information to help clients to avoid all these. But no matter how careful you are, there would still be some risk of eventuality.
3) Negotiating in “panic mode”.
So your company is planning to relocate urgently whether it’s downsizing or expansion. Or you are given the notice to vacate by either one of the reasons above. You become panicky as time is running short and you have a limited budget.
So the mistake here is, while viewing, you unknowingly leaked out your reason for relocating to the landlord. Or even you don’t, but your desperate demeanor becomes too obvious to the landlord who can sense it straight away. The landlord would use this “signal” to his/her negotiation advantage.
Stay calm and take a deep breath. Most tenancy usually provides about 3 to 6 months period for the tenant to move out. But remember to give 2 weeks buffer for reinstatement of the premises.
To play safe you should shortlist 3 office units instead. Don’t get caught off guard when there happened to be another interested party who offers much better rate than yours that the landlord accepts theirs instead.
The key is to engage a commercial agent who usually has a huge list of commercial spaces to suit your any requirements fast. He is the one who are well prepared to serve you in this urgent cases.
4) Hidden Incentives.
It can be quite pressurizing during the negotiation phase. In the intensity of the moment, a lot of clients will miss out on lots of hidden incentives which the landlord will not openly offer.
One such incentive is rent-free fitting out period. For a longer lease term tenancy, eg. 3 – 5 years, the client can ask for more incentives which are not necessarily monetary in nature.
This can be in the form of a longer fitting-out period. Make sure you are aware of it. Depending on the size of the office. Usually, 2 weeks to 1 month period is the norm for the incoming tenant.
For bigger size spaces like 3,000sqft & above, one & a half month to 2 months rent-free fitting period might be possible. If, however, the premises has already been renovated by the previous tenant, then the fitting-out period would be different.
In some cases, depending on what negotiation advantage you are in, provided there is no competing interested party for the same premises, one can even ask for a more rent-free period over and above the fitting-out period. We have helped client achieved this.
5) Backing-Out Because Of Emotion.
Finally, you are about to sign the contract. You happily accept all the incentives given by the landlord. However, the estate agent forgets to disclose some trivial issues.
For example, you are supposed to service the air-conditioning units at your own cost which is so different from your previous office. Or you need to install an electrical meter reading device within the leased premises, certain reinstatement criteria, corridor contribution value etc. (contact us if you want to know what these are).
You are taken by surprise and you go through the roof fuming mad. You threaten to back out of the deal. Again, stay calm. Let’s take a moment and put the matter in perspective.
You have already gone through the whole hectic process of hunting, viewing, shortlisting, negotiation and finally arriving at the endorsement stage. Don’t waste and throw all your effort down the drain. It’s actually a small cost if you amortize it over the lease term.
Frankly, these are but minor issues. Because the major ones would have already been highlighted in the beginning prior to even viewing the office. If you are affected by them, you wouldn’t have viewed or even shortlist the space to begin with.
Again, a competent commercial agent is able to reveal most major & minor issues to his client beforehand.
In a tenant-friendly market condition, landlords are more than willing to throw in lots of attractive incentives. At times, we would even know of some extraordinary price advantage from the landlord. Most of our tenant clients were pleasantly pleased with it.
However, when the economy is on the upswing, landlords would have more negotiation power as the rental rate increases. When this happens, you really need a skilled tenant representative to proficiently close the gap between you and the landlord expectations.
But whatever the circumstances, it is crucial to avoid the above mistakes first as it can be very exhaustive as much time & effort is wasted. So, All the Best in Renting the Right Office Space!
About the Author:
Joseph Siat has more than 15 years experience in the real estate industry and has transacted over $100million value worth of properties. He is a renowned property consultant specializing in the commercial property market. His OfficeWise team comprises a group of “Elite”, determined and passionate office rent and sales real estate consultants who are highly knowledgeable about the Office, F&B, Retail and Industrial Space market.
The writer takes due measures to ensure that the all information provided are as reliable as possible but will not be responsible for any wrong or inaccurate information that has been featured herein. The writer does not make any representation, endorsement, warranty or guarantee the completeness or accuracy of the information and materials provided above. The writer shall be indemnified and will not be held liable for any direct, indirect, special or consequential loss or damage that may arise out of or in any way connected with any error, omission, the use of or reliance on information or with the inability to use the same, whether resulting in whole or in part, from breach of contract, tortious behaviour, negligence, strict liability or otherwise.