Leasing an Office Space: Everything You Must Know

Office Space

Every successful company needs a proper space for establishing its headquarters. So, when the time comes to choose the right space to rent, you must be aware of certain things.

In this article, you will learn everything about the details you must know before leasing an office space. Since it’s a big decision, there’re some considerations that you must keep in mind. Let’s observe:

1. NNN expenses.

2. Utilities.

3. Build-out.

4. Furniture, fixtures, and equipment (FF&E).

5. Marketing.

6. How is the process in Dubai?

7. How can Connect Business Centers help you?

1. NNN expenses

If you’ve ever started looking for an office for rent, you’ve almost certainly come across the terms “triple net” or “NNN” after a leasing rate. These three Ns represent a triple-net lease. In a NNN lease, the landlord charges the tenant a base monthly rate.

However, the landlord also passes on the costs of taxes, insurance, and common area upkeep. We’ll go through each of these in further depth shortly. Not every retail lease will be NNN, but it’s by far the most frequent. Thus, understanding what a tenant is liable for within these lease agreements is critical.

1.1. Property taxes

Your potential landlord should pay taxes on the retail space you’re contemplating leasing, just like any other property. If you agreed to a NNN lease arrangement, this cost will be passed on to you as the tenant.

Taxes are often non-negotiable because your landlord doesn’t regulate the tax rate.

1.2. Building Insurance

Just like taxes, landlords have little to no influence over property insurance costs and will thus pass the cost on to renters. Many types of retail businesses are necessary. That’s why you have to provide proof of large insurance coverage in order to acquire the lease in the first place.

Meanwhile, every firm is obliged to carry liability insurance and workers’ compensation insurance.  To mention a few, some retail concepts must present proof of a minimum amount. This is especially true for bigger retail establishments that will be serving several customers at the same time.

1.3. Common area maintenance (CAM)

CAM is the umbrella term for the upkeep of all “common” places associated with your retail property. These are some examples:

  • Lobbies.
  • Restrooms in the common area.
  • Parking garages.
  • Elevators.
  • Hallways.
  • Landscaping.

All common areas require constant maintenance, particularly in multi-tenant assets, but are not rented by a single tenant or institution. To assure the care of these places, the landlord will charge the renter a fee to cover the expense of maintenance.

If there are many renters, each will pay a pro-rata share of the charge. CAM costs are also more adjustable than NNN costs. Because CAM is more manageable than taxes or insurance, a renter may be able to negotiate what they may anticipate.

While it is incredibly rare to totally bargain your CAM charges out of the discussion, it’s often reasonable to set a ceiling on what the renter may be expected to pay.

2. Utilities

Utility bills are another item that will not be included in your regular rental payment. These expenses include:

  • Lighting.
  • Electricity.
  • Heating, air conditioning, and ventilation.
  • Water.
  • In addition to any trade-specific utilities that you may require.

These other expenditures might range from additional display lights for a boutique retail store to power-intensive cooking requirements for a busy restaurant. While utilities may be calculated, it’s critical to consider your unique demands rather than rely on general information.

Even if a former renter is willing to split the cost of their energy bill. Their usage may not be consistent with your idea, giving you a distorted estimate of your electricity expenditure.

3. Build-out

It’s well known that it can be very difficult to get an office for rent. It could be a fully open shell space or a previously built-out retail site.  In any case, you’ll need to conduct some work before you can occupy and open your doors for business.

The prospect of affording a build-out on top of paying rent may be intimidating. However, the tenant has a number of options to assist in offsetting construction expenses.

3.1. Tenant improvements negotiation

Negotiating a Tenant Improvement Allowance, or TIA, with your prospective landlord is the most frequent technique. This allowance is frequently computed as a cost per square foot of space.

For example, let’s say you lease a 5,000 square feet facility with a $20 (AED 73,45) per square foot allowance for improvements. In this case, the lessor will provide you with $100,000 (AED 367,250) to cover construction costs. It’s vital to remember, however, that the tenant will be accountable for these expenditures upfront.

It’s important to highlight that most of the leases will need documentation of completion, such as invoices and lien releases. These documents are necessary for a landlord can compensate the renter for their labor.

3.2. Periods of rent abatement

The landlord also has his ways to help offset the construction costs. These ways can be by paying deferred rent or by doing part of the work themselves.

It’s remarkable that there’s a lot to think about when approaching a build-out.  However, an experienced contractor can assist with anything from space planning to financing.

4. Furniture, Fixtures, and Equipment (FF&E)

FF&E is another cost that all retail business owners should be aware of. However, it varies greatly from idea to concept. FF&E will contain the following:

  • Desks and other pieces of furniture.
  • Computers.
  • Racks for display.
  • Vents on the hood.
  • Ovens/stoves.
  • Kitchen refrigeration.

You’ll require all the FF&E for establishing your firm. So, it’s critical to budget for these things early on so you’ll be able to include the costs in your first cost analysis. Fortunately, these can generally be budgeted alongside your construction process.

A business contractor will typically be able to obtain equipment or point you in the proper path if you engage them.

5. Marketing

Opening your store to the public appears to be a distant goal at the start of your hunt for an office space for rent. This is understandable. However, it’s never too early to think about marketing. Marketing helps you to generate enthusiasm about your concept and build anticipation for its big debut.

While marketing is crucial, how much you decide to spend on it is mainly up to you. Many firms flourish by investing enormous sums of money in marketing tactics. On the other hand, many small enterprises have achieved equal success by taking a more grassroots approach with:

  • Pop-up gatherings.
  • Social Media.
  • Collaborations.
  • And much more.

When everything is said and done, your marketing strategy is entirely up to you.  Nevertheless, it is prudent to budget for any related expenditures ahead of time.

6. How is the Process in Dubai?

When you’re looking forward to renting office spaces in Dubai, there’re various factors to consider. As previously stated, many commercial licenses are available for people operating businesses in Dubai. Based on your license, you must determine which places are appropriate for renting commercial property in Dubai for your company.

For example, if you have a TECOM-free zone license, you must keep your business workplace at the same location. You should also consider the following:

  • The feasibility of your business from your preferred location.
  • If your space is a showroom for walk-in clients, the area’s accessibility for the target customers to create enough footfall.
  • There are enough parking spaces for the number of employees you have.

6.1. Who is eligible for a lease on a commercial property?

Prospects applying for business space for rent must have a valid trade license granted by the Dubai Economic Department (DED) or a Dubai Government Free-zone. Entrepreneurs who hold these licenses are able to operate their businesses from an onshore or free zone location.

6.2. What paperwork is needed to lease a business property in Dubai?

Instead of a leading state license, tenants applying for a leasing office space must also present other important documents. Such documents are:

  • Provisional approval from the emirate’s licensing authority.
  • A company manager passport whose name appears on the trade license,
  • A signing authority letter if the name does not appear on the trade license.

Another key point is that tenants must understand the distinction between doing business onshore and in a free zone. Foreign entrepreneurs who operate their enterprises onshore in the UAE are subject to the regulatory oversight of the Dubai Economic Department (DED).

This means that they must have local partners who own 51 percent of their firm by obligation. Furthermore, businesses must pay a 5% import charge if they import any form of items for resale.

In contrast, operating a company in a free zone is more convenient. That’s because it gives you 100 percent control of your company and the local free zone administration becomes your partner. Moreover, if you want to conduct your business onshore, you’ll encounter various constraints that while not essential to obey, must be considered.

6.3. You must know the contract’s terms

Tenancy contracts have a minimum term of 12 months. Additionally, they can be automatically renewed after that time if both parties agree to continue. Tenants and landlords can also extend their lease for up to 10 years.

6.4. Key considerations before leasing office space

A physical address in the form of an office is required for every firm doing business in Dubai or the UAE. That’s why if you want to make business in Dubai, you must look for a commercial office space for rent. Some of the factors to examine are as follows:

  • For specific businesses that require adequate amenities, good office spaces are vital.
  • You must evaluate the closeness of rival businesses and how they may affect your business.
  • The general mood and ambiance are critical for a variety of reasons, and they shouldn’t be underestimated.
  • A well-designed office building should be functional in a variety of ways. Take into account all of the accessibility aspects. Check to see whether the facility has a handicapped meeting room and a wheelchair ramp.
  • When you’re selecting an office for rent, always ensure that there is sufficient parking capacity available.
  • Pay close attention to the rent cost to ensure that you understand what is and is not included. Other than utility payments, maintenance, and so on, other expenditures are expected.

7. How Cn Connect Business Centers Help You?

You, as a business owner, need a proper space for lease where you can establish your company. The process of finding the right office space for rent may be difficult, especially if you’re a foreigner. That’s why you need the help of a professional and experienced real estate company.

We are a company with more than 20 years of experience in the real estate market in Dubai. Hence, we’re able to get you the perfect office space for rent. You won’t have to worry about looking and the contract terms since we’re going to assist you in the best way.

Would you like to Connect Business Centers to obtain more information about everything you must know before leasing an office space? If you have any questions, call us at +97143316688. You can email us at contact@connectbusinesscenters.com, and you’ll talk to one of our representatives who will answer your questions.

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Kate works at Connect Business Centers as Sales Manager, She is graduated from London and moved to the United Arab Emirates in 2017, She is a specialized agent for finding Business Centers, Office space, Co-working spaces to the clients based on their requirement and in addition to it, she also happens to be specialized in UAE mainland Company formation, Golden Visa, Bookkeeping, VAT registration and PRO services.

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