The 5 Simple Stages of the Office Leasing Process Explained.
The process of renting an office space can be daunting for anyone, whether you are a first-time mover or repeat office relocator and it is always a challenge.
The two most important decisions any office mover has to make are:
- Picking the right real estate broker. It is essential that they introduce to you every suitable option and be able to guide you through every step of the leasing procedure.
- Selecting the most suitable interior design firm that can provide a ‘turnkey’ solution for you, including project managing the entire process.
Step 1
How to pick the best office space agent for your needs
There are some basic checks you should carry out when choosing your agent and remember, it is the individual leading your case that matters most – not necessarily the global footprint of the agency. You should look into:
- How experienced is the individual agent? Are they junior or senior?
- Market Knowledge – not just past experience, but present knowledge of current opportunities.
- Resources at their disposal – presentation materials and supporting documents, an office building information database, historical research on a building’s leasing record etc.
- Transparency – how sure are you that your agent will show you everything, or just those properties they are marketing?
- Commitment – you need to be sure your agent will be there for you every step of the way, and will not be distracted with other cases.
- No conflict of interest – it is imperative that you are certain that your agent is not also acting for the other side i.e. are they appointed exclusively to be acting for the landlord? Also, check there is no conflict with any of their team acting for another company with a similar requirement to yours.
- Don’t sign an exclusive agreement with any one agent, as this would stop other agencies from introducing alternative options to you. Propose a preferred agent status.
- However, it is recommended to not use too many agents and stay loyal to your first-choice agent, but keep an open mind to check with other agents if necessary.
Step 2
How to choose your new office
- Review a full summary of options and consider expanding your search area and be flexible on size or budget criteria if need be. This will widen your choice and may uncover (present) the perfect space which you may otherwise miss.
- Narrow down a shortlist of around 20 properties for further analysis.
- Further narrow down a shortlist of properties to view – usually from 7 - 14 properties. If the wish is to view a wider range of properties i.e. 14 and above, break down the site visits to 7 - 8 properties at a time. Viewing too many buildings at one time will lead to confusion and evaluation fatigue.
- If you have found the ‘one’ we recommend you proceed to the lease negotiation phase with the original agent who showed you around the premises in the first place, unless you have a good reason to switch.
- Make sure you start your search with ample time, ideally a minimum of 3 - 4 months before date of possession (maximum 8 - 10 months).
Step 3
Selecting your Interior Designer
- The tenant should seek comparisons between at least 2 - 3 different interior designers.
- Each designer should usually prepare a test fit for the shortlisted property. This is normally undertaken free of charge from the designer, who is hoping to get the appointment at the end of the day.
- It is important to get a designer involved at this stage, as they can then determine:
- Is the space the right size – large enough for your requirement?
- Is your fit-out budget realistic?
- Is the floor area given by the landlord accurate?
Step 4
The Negotiation Process
- Your agent should start the negotiation process by making a formal offer on behalf of the tenant, for the shortlisted property / properties. The offer is in the form of a Letter of Intent but always subject to contract - so not binding to either party, in any way whatsoever.
- Some tenants prefer to offer on more than one property, and offering on two properties is not ideal but not uncommon. It is discouraged to offer on multiple properties, as the landlord might not take you seriously if they find out about your other offers.
- The landlord will usually make a counter offer, subject to contract, with a deadline for acceptance.
- The agent will usually make another offer before the deadline. The landlord may come back with improved terms, with a new deadline for acceptance. The tenant can still back out at any time at this stage.
- Once Heads of Terms are provisionally agreed, the landlord will issue a formal Letter of Offer with a deadline for acceptance. Often deadlines can be extended once, sometimes twice, but rarely more and is never left open ended.
- The Letter of Offer from the landlord will usually state the tenant is ‘agreeable to the standard form of lease’, a sample of which should be attached with the Letter of Offer.
- It is critical to understand that any formal Letter of Offer is no longer ‘subject to contract’ and is binding, once signed by both parties. This is why it is so important for the tenant to have a local lawyer check through the sample lease before signing.
- Upon signing a deposit is required to be paid – sometimes one month and sometimes the full three months rental deposit is payable, depending upon the landlord and/or the paid-up capital of the tenant company.
- If one month deposit is paid, it is sometime treated as one month’s rent in advance, with the full three month deposit paid upon signing the lease documentation. In such cases, the deposit already paid upon signing the Letter of Offer, will be offset against the first months rental paid in advance.
- The fitting out manual is made available to pass to the interior designers.
Step 5
Taking Possession / Start of Fitting Out Period
By this time, the lease normally has to have been signed and all deposit monies paid over (but not always).
At the time of the handover the tenant should do the following:
- Have their designers and agent present. Why? The designer will check / record the condition of the premises at the time of taking possession. Any defects spotted should be rectified by the landlord. Defects not identified will be the responsibility of the new tenant!
- The agent should then check that everything else is in order and handover has been documented correctly. This will mark the beginning of the tenant’s fitting out period.
- The Fitting Out Period is always rent free, and normally ranges from 1 - 3 months (depending upon the size of the space) and will be outside the lease term i.e. before the lease commencement date.
- During the fitting out period, sometimes, the service charge is payable during this period, but not often.
- Your interior designer should have all fitting out insurance in place beforehand. Otherwise, the new tenant is responsible for any damage caused during the fitting out process.
Lease Commencement
Congratulations! You’ve done it. Everything is now completed.
We hope you and your team enjoy your new office, and wish you all the best for the next stage of your business.
To stay informed check out our latest Office Market Review.
And to keep up to date on the most recent rental rate for your building, visit our Singapore Office Rental Rates page.
