SEARCHING FOR THE BETTER PLACE
For the purposes of budgeting early on in the process, you don’t necessarily need to know the exact size of the office space you need, but consider that 100-150 square feet per person is the recommended size to allocate each employee. Multiply it for the number of your team to had an idea and start to search.
You’ll find prices like “$52/SQFT” or “$4.33/SQFT per month”, but you should know, however, that this is just an initial calculation. Office space comes with additional expenses factored in the lease. And even the rent and how it’s defined will need clarification.
The cost of office space can vary significantly within a city. Factors in the cost of an office include building class, building amenities (doorman, lobby, etc), and neighborhood.
Office lease rents are usually advertised as a dollar-per-square-meter figure. This can be advertised per annum or per month and is typically exclusive of GST. For example, say a 50sqm office is advertised at $65 per square meter per month. The annual cost to rent – excluding GST – would be: $65 x 50 x 12 = $39,000. GST can be worked out by adding 10 percent to the rental figure. Therefore, the annual rent inclusive of GST would be: $39,000 x (1.1) = $42,900.
Gross rents are an all-inclusive figure that includes all building outgoings. Under a net lease, outgoings are separated from the outset and clearly outlined as an additional cost to the tenant.
Outgoings, which are passed on to a tenant, include:
- Land tax
- Building insurance
- Repairs and cleaning costs (excluding capital costs)
Management feesIncentives are typically applied in addition to gross rent and can comprise a rent-free period, rent abatement, a fitout contribution, or a combination of such incentives.
According to Colliers International tenant advisory director Rowan Humphreys, in reality, commercial rent is finalized by negotiation – it is essentially an offer and acceptance process.
Further down the line, once you’ve found a space you like, you will need to transform the space into a functioning office. Landlords will often contribute to the renovations with what is called a Tenant Improvement Allowance (TIA), a sum of money to help cover costs. Your broker can help you negotiate how much and how the landlord could allocate it.
Throughout the office leasing process, a broker can help you manage costs and find savings wherever possible. Besides that, the best part about working with a tenant broker is that it’s free to you: tenant brokers collect commissions from landlords, so you won’t pay anything for their expertise and guidance through the office space leasing process.
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