The Singapore Office Rental Guide For New Tenants
Businesses, especially foreign companies setting up their first office in Singapore are often not familiar with Singapore office rental process and the associate cost when renting an office space.
This Singapore Office Rental Guide is by far the most complete and highly relevant. It covers all aspects of the cost associated to renting an office space and provides a detailed step by step guide to the process of finding an office space in Singapore,
Practices that are common with leasing vary from one country to another, so also are the terms and conditions that apply. The practices you are probably familiar with may not apply in another man’s homeland. Therefore, these are common practices and terms followed by landlords and tenants when it comes to renting an office space in Singapore.
Although the title states that it is for new tenants, if you have previously experienced the process of renting an office space in Singapore, you may want to continue reading our guide on office rental Singapore. We are certain that you will pick up some useful information along the way.
Associated Costs When Renting an Office in Singapore
When looking for an office space for rent in Singapore, many companies are barely aware of the costs that go along with the office space rental. The first part of this guide provides you with an in-depth understanding of all costs associated to office rental Singapore.
Putting into consideration all the cost attached to renting an office in Singapore is very important before signing the lease document. This is important because, even though affording the office space rent, you have to also consider stamp duty, Goods and Services Tax, insurances, security deposits and other costs involved.
Goods & Service Tax
Apart from the agreed monthly rent, an office tenant is also requires to pay the Goods and Services Tax (GST) of 7%. That is, if the monthly rent is $10,000 you should be expecting to pay $10,700 inclusive of the GST of 7%.
Fees that go with services such as air-conditioning during office hours, maintenance of common areas and general management are usually included as part of the gross rent.
The charge varies from building to building between S$0.50 to S$1.20 per square foot every month. The fees generally cover the areas such as management fees, building repairs, public and fire risk insurance, security services, air-conditioning during standard office hours and maintenance of the building which includes electricity and water.
The precise amount will be indicated in the lease document, but can be changed anytime during the lease term as occasion demands. Because of this, there is usually a clause in the agreement that allows landlords collect any, arising increase in the service charge from the tenant.
Most central air conditioning systems are generally put to use during office hours in most office buildings. On weekdays, they run from 8am to 6pm while they run from 8am to 1pm on Saturday. With $40 to $80 per hour, after office hours air conditioning system usage can be arranged for use in most buildings.
It is also common practice in Singapore, that the amount of a company’s paid up capital, determines the amount the tenant pays as security deposit. Many times, this amount is equivalent to three or six months gross rent. Although it is refundable and paid in two phases. The first payment is done when the Intent to lease by the tenant and the Letter of offer by the landlord are exchanged between the two parties. The balance of the payment is done when signing of the lease agreement, commencement of the lease term or occupation of the premises, whichever take place earlier.
When the tenancy expires, the security deposit is then refunded without interest on the ground that the tenant kept to the terms and conditions stated in the tenancy agreement. Any breach of contract by the tenant gives the landlord the right to deduct costs and expenses which must be duly paid for by the tenant. In the case of any form of renovation in the office space, a separate refundable renovation deposit is paid to the landlord or the building management to cover for damages that may occur in common areas of the building while renovating.
The landlord pays a 10% equivalent of the annual assessed value as property tax. Nevertheless, there may be a clause in the lease agreement allowing the landlord to recover any increase in property tax attributed to the premises, stated by the Inland Revenue Authority of Singapore during the lease term from the tenant.
Typically and more often than not, an office tenant is asked to pay an initial fee for organizing paperwork, such as preparing the rental contract. If the cost is fair enough, the tenant cannot really avoid it. The amount of these fees varies per landlord.
A tenant pays stamp duty on the tenancy agreement when renting any immovable property. With the agreement document signed in Singapore, then payment can be made within 14 days from the date of signing and within 30 days from the date of receipt in Singapore if it is not signed in Singapore. The Inland Revenue authorities of Singapore take very seriously late-stamping and non-stamping issues. As a sketchy guide, an estimate of around 0.4% of the total rental value of the lease period is the cost of the stamp duty. So for example, for a lease agreement of two years with a rent of 2000/month, the stamp duty would be 192 calculated as (2000x12x2/250). Click here to download the official stamp duty calculator for your office space tenancy agreement.
Utilities and Telecommunications
The tenant bears sole responsibility for the general payment of electricity and telecommunication bills to the relevant service providers using their accounts provided. The gross rent already took care of the air conditioning services during office hours and the additional after office hour air conditioning service on request since most of the office buildings in Singapore have centralized air-conditioners owned by the landlord.
Car Parking Space
For buildings outside the Central Business District (CBD), a monthly charge of about SG$100 to SG$200 is payable for each vehicle parking in the building and S$170 to S$350 for buildings in the CBD. This charge depends on the car parking situation at the building of the rental office and the number of season parking lots allocated are determined by the total area leased.
In Singapore, all through the lease term, tenants are expected to keep a public liability insurance policy against any property damage, death or personal injury allegation, or any other form of loss arising during the time of the tenant in the premises. Tenants are to get an insurance policy for all fixtures, furnitures and fittings of their office against risk and damage. In the case of office renovations, tenants are also required to insure against Fire and Special Perils during the time of such works.
A refundable renovation deposit ranging from S$1000 to S$5000 is made to the management of the building before any renovation works is carried out within the rented premises. This will serve any costs incurred for rectifying damages done to the building during the work period. The renovation deposit is refunded upon renovation completion and inspection by the building manager. Refund is done according to damage level.
Office Renovation Work
A typical Singapore office space usually comes with standard fittings which includes suspended ceilings, cemented or raised floor system, standard fire sprinkler and protection systems, basic lighting, central air-conditioning distribution ducts and window fittings.
Any need to remodel the office to suit your preferences, may be done in accordance with the terms and conditions outlined by the landlord (typically, large office building keeps a standard fitting-out manual) with regard to all renovations at the premises. In this case, based on the space and floor area where the renovation work would be done, a tenant may be able to negotiate no rent payment for a period of two weeks to three months.
The fitting-work cost depends on layout complexity, floor space and technical requirements of different businesses. It also includes the charges of interior design providers or architects. It ranges roughly from S$20 – S$30 per square foot for a low range budget, S440 – $60 per square foot for a mid-range budget and above S$70 for a high-end budget.
Reinstatement of premises
The tenant is expected to clear the office out and leave it as it was upon the expiry of the lease. In some cases, the landlord or the incoming tenant may request for the fixtures and fittings not to be removed. Reinstating the office back to how it was normally takes about 2 weeks.
On the average, it costs approximately S$5 to S$15 per square feet (S$54 -S$161 per square metre) to reinstate the whole office premises back to its original condition.
Property Agent Commission
In Singapore, the landlord renting out the office space compensates the agent representing either himself or the tenant with a broker fee. Most tenants, therefore take advantage of the knowledge and expertise of an office rental agent.
3 Key Considerations When Renting An Office Space in Singapore
After understanding the costs associated to office rental Singapore, this section of our Singapore Office Rental Guide will get you prepared before starting the office space search.
With the minimum commitment term expected and the high cost when acquiring a rental office space in Singapore, it is therefore imperative that prospective tenants find the best office space available for their kind of business so as to effectively maximize profit. Office real estate generally adds up to 20% of a company’s costs, which is just next to salary costs.
Before starting out on any office space search, these three important aspects of renting an office space must be understood.
Every prospective tenant should first estimate how much space his business would require. This would give a clear picture of what to expect. What this would do for you is to save you time in going to and fro looking at offices that are either too large or too small. It will also help your office rental agent in getting you exactly what you want.
Certain elements determine the size of an ideal office space. The main determinant is the number of staffs you have or are hoping to have. The industry rule of thumb currently states a floor size of approximately 100 square feet per person. This floor size takes into account a small reception area, small meeting room and utilities.
In the case where a prospective tenant has 20 staffs, he would likely require a space area of approximately 2,000 square feet. There are certain exceptions to this. If a large boardroom, reception area, multiple offices, pantry etc are required, then the floor size will increase. Note that there are newer layouts different from the conventional types that may affect your space planning.
Another element to put into consideration is the fact that the lease keeps the prospective tenant in the same office for at least two years, you might therefore need to add an extra of 10% to 20% of the total square footage to the needed space to accommodate future growth.
Keep in mind also that it is more cost effective to have the reserved space for future use than to terminate a lease early which attracts additional expenses, not forgetting also the cost of moving.
Selecting an Office Location
Office location is a very important aspect to consider when looking for an office space. A wrong location choice can have an adverse effect on the profit margin of your business. Putting all necessary aspect into consideration to guide you in choosing the right office location will maximize value and minimize costs.
One of the major aspects to consider is an office that is central to clients and can be easily accessed by them. An office too far from the client base will deter business since it would be difficult for most clients to come in for business
Another point of consideration in making location choice is proximity to staffs. It is advisable to be at a close proximity to staff’s public transport station. This would help in attracting and retaining the right staff who also put in consideration their own ease. It would also increase staff efficiency and early arrival to work place.
Knowing The Office Rental Rates
The major determinant of the office rental rates is location. In Singapore, the office space with the highest office rental rates are found in Raffles Place and Marina Bay Sub-zone of the Singapore CBD. Upcoming companies that cannot afford these locations because of cost would need to settle for less expensive locations that closely meets their requirement.
The ratio of clients in a particular area can streamline location selection. If majority of a prospective tenant’s customer are within the CBD (for example clients for a law firm), then locating his office in the CBD may be his only choice. An IT company’s cost may be cheaper (all other costs considered) if located in a Business Park or Tech Park. Lower cost options are usually found in buildings with high vacancy rate. Office space near to MRT stations generally command higher rent than others.
Other determinants of office rental rates are the quality of the building and general outlook. Refurbished old heritage style building like the conservation shophouse office spaces cost a lot lesser and are much sought after by creative tenants because of its uniqueness.
Modern buildings that have up-to-date with comprehensive security system, quality tenants, high-speed lifts and etc cost more than old buildings that have tired facilities. The natural outlook of a building also affects office rental rates . Buildings facing parks, or have sea or river view and have a pleasant outlook cost much more than others that don’t have such perks.
The Singapore Office Rental Process
In the last part of The Singapore Office Rental Guide, we will take you through the whole process of getting a Singapore office space to actually moving in.
Establishing Requirements of The New Office Space
The first thing to do is putting together a project team. This team should be made up of individual who you trust their business judgement. The other members of the group besides the tenant should be the office manager, HR manager and finance manager or a trusted employee and an office rental agent.
This is the time to apply what you have learned in part I and II of this guide. The primary role of the project team is to establish the requirements of the new office space. Requirements include the location of the office. Where the office will be situated, the amenities and business services available in proximity to the building, and your staff projections for the space needed. This would save you and those helping you, time and energy.
If the requirement for the new office space is complex, then more members can be added to the team. In the case where a larger office space is required, then an office space planner can be included to the team.
The office space planner can assist in reducing the space required by efficiently utilising the floor space of each proposed office spaces, that is to fit more people into a given floor space instead of finding a larger office space. A well planned office layout will enable effective office functionality, foster team collaboration and maximising productivity.
Communications to give daily progress update should be established until an ideal office space is found.
You should be able to trust others to help you through the daily search for the new office space. Since, many times, tenants especially those with small businesses tend to want to do all the work involved with searching an office space alone. With the help of a professional office tenant rep, this will relieve you of stress and give you room to guide the searching process and focusing in making final decisions.
Selecting The Available Office Space
It is imperative for you to discuss your growth projections with your office rental agent. This will help the office rental agent, get just the right property that would serve its purpose both at the beginning of the lease term and still be very appropriate even with the additional staffs towards the end of the lease term. This information should be shared with the office space planner in the team, who would evaluate and advice on the feasibility of an office space during the space selection process.
With a good understanding of your requirements on the new office space, an experienced office rental agent would be able to suggest a list of appropriate office buildings and office spaces for your selection.
During this process, it is important that the project team follow closely on the requirements established earlier.
Office Space Touring
The office rental agent at this point can make arrangements to take you and the team members around in search of the office space that best fits the need.
During the tour, the project team should bring along a checklist listing the requirements of the new office space, evaluate the characteristics of each office space and document findings and feedbacks from its team members
As the search progresses, there is the tendency to forget the important aspects of the buildings and office spaces already checked. This checklist can be helpful when the team is ready to shortlist the most favourable office spaces from the lot that was viewed.
A basic checklist should include the followings:
- The location where the office is situated, the availability of the business services and amenities;
- The rent cost and other associated costs: not forgetting duration of the lease term.
- The accessibility of the office building
- The efficiency of the new office space in serving the needs of the day to day office functions
- The size of the offices and open areas
- Consider also the Size of common use areas in the office space like the conference rooms, copying and printing room, break or rest area and storage rooms.
- Consider also your Computer / Server room requirements if your business needs it
Pay attention to the condition, the amount of renovation needed. Fittings for your office space should be well thought out, to be able to pick the kind of renovations that will best fit while keeping at the back of your mind that there would be reverting the office space to its original state at the end of your lease term.
The office space tour provide the perfect opportunity for you to acquire knowledge about the office space rental market and it makes you especially aware of the slight change that takes place in each sub-market.
Your office rental agent can initiate the negotiation with the landlord or landlord’s agent as soon as you decide on an office space.
One of the primary reasons for including an Office rental Agent in the project team is to leverage on his expertise of the office market and negotiation skill. Your office rental agent should be able to provide you with sufficient data before establishing a reasonable offer to put across to the landlord.
A letter of Intent (LOI) is prepared by the Office Rental Agents and the tenant team for the office space. An LOI is a formal letter outlining the tenant’s specific needs and the basic lease terms.
All the terms on the LOI are taken with utmost priority by the landlord and they usually form the basis for negotiating the lease agreement.
Once the landlord receives the letter of intent, he does a company check on the tenant’s business. He checks the tenant’s paid up capital to be sure the rent can be afforded. A letter of offer alongside a sample copy of the Tenancy Agreement is issued to you by the office space landlord as soon as the landlord is satisfied with your application upon reaching an agreement on the basic lease terms.
You should return alongside a signed copy of the Letter of Offer, a non-refundable deposit as well as other associated fees. As soon as this is done, the premises will be secured until the Tenancy
Entering into the Tenancy Agreement
The tenancy agreement document is given to you by the landlord for signing. It advised that on receiving the agreement, it should be scrutinized by a legal counsel that specializes in office space rental. You are required to sign and return the duly signed tenancy agreement to the landlord alongside the required security deposit.
You can take possession of the office space according to the time stated in the lease agreement after the tenancy agreement has been signed as well as after the payment of the necessary security deposit. With the approval of the landlord to carry out any renovation, any fitting out work that is needed can now be done in the premise.
We hope that this Singapore Office Rental Guide will be helpful to you when finding an rental office space in Singapore.
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