News Blog - Commercial

15 January 2015

RENTING AN OFFICE FOR ROOKIES

When considering renting a commercial office, there are a number of factors to be taken into account…

Location, Location, Location!

The first is location. Ideally your office should be accessible and central to your clients. If for example, the majority of your clients are in Parramatta but you are looking at spaces in North Sydney, remember the age-old line ‘location is everything’. If you are far from your client base this will no doubt act as a deterrent when it is time for them to come in for a meeting or catch up. And if you have 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.

The same can be said for your staff and the choice of location. An important consideration in Sydney is proximity to public transport.  It is 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 them.

Does Size Matter?

The second thing to consider is size.  Size is determined on a few elements, the main one is the number of staff you have. Industry rule of thumb is approximately 10m2 per person.  This number takes into account a small reception, small meeting room and utilities. Therefore if you have 10 staff it is likely you will require approximately 100m2. There are of course some variables to this.  If you have large boardrooms, breakout areas, multiple offices, kitchen etc. then your size requirement will increase.

Money Talks

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.

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.

In the Beginning

The fourth are setup 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 subject to you supplying 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 $1,000 and $2,500.

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.

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.

If the office has a nice fitout in place then the incentive will be lower, and vice versa if there is high vacancy. At time of writing incentives are strong, institutional owners are offering at least a 20% discount on the terms 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, in some cases fitout contribution is also offered.

In a Nutshell…

Renting an office space should not be so super 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.

Speak to one of our team members and let them put all of the available options to you. All you have to do then is, make a decision.

Date: 15 January 2015 Author: Adam Hennessy
Commercial
Adam-Hennessy-admin

About the author:

Adam Hennessy

Adam Hennessy has been involved in the Sydney commercial real estate industry for over 16 years and is Director of Office Services at TGC. After owning Ray White Commercial Sydney Leasing, Adam joined TGC in January 2007 with a mandate to grow TGC’s office services portfolio.

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