5 Tips When Buying or Renting Your Next Office
Whether you are planning to purchase or lease your next office, there are several factors that you should consider carefully before committing to any commercial property.
#1: Types of office spaces
In Singapore, office spaces are classified into Grade A, B and C categories. Broadly speaking, Grade A offices are found in prime locations such as CBD area, mostly brand new, have recently been redeveloped, or have undergone refurbishment. Grade B offices are relatively cheaper than Grade A offices, and are mostly well-maintained with adequate facilities. Grade C offices provide functional working space with low rents but might be much older compared to the other grades.
Smart Tip: Always remember that the most expensive and premium offices may not necessarily be the best choice for your business. Unless it is purely for investment, you should consider your business needs and budget carefully before deciding the type of office space to buy or lease.
While there are freehold commercial properties in Singapore, most are leasehold due to the scarcity of land in the country. Most commercial spaces come with 30, 60, 99 or 999-year lease. This is an important consideration when you are planning to buy a commercial property. Although purchase price will be lower for properties with shorter leases, financial institutions may quote lower loan quantum for properties with 99-year lease or shorter.
Smart Tip: If budget is your primary concern, then opting for a Grade C office might be more ideal as they will be lower in price or rent. However, this is usually traded off with a shorter tenure of the remaining lease on the property. If you are leasing, try to avoid office units with leases which are too short, as this will be disruptive to your business operations if you need to relocate once the lease is due.
This is probably the most important factor in your office selection. It is important to bear in mind that the location of a commercial space is affected by the tenure and type of property. If you are buying or leasing for your own business, then it is important that your chosen location complements the nature of your business, is accessible for you and your employees and has sufficient amenities or facilities that you require.
Smart Tip: One way to facilitate your search process for the ideal office is to pre-determine your desired location and estimated budget. This will effectively reduce unnecessary hassle and time wastage for both you and your property agent. Instead, you can focus on viewing properties that meet your prerequisites.
As you work on the budget for your next office, it is important to note that commercial properties generally have lower price per square foot (psf) than residential properties. Commercial property prices are also more stable than residential properties because they might not be affected by the cooling measures implemented by the Singapore government. If you are planning to purchase, ensure due diligence is done with proper research on the future development plans of the area in order to assess its potential growth in the mid and long term.
Smart Tip: One way to assess the potential of the area where you plan to buy your commercial property is to first look at the Master Plan from the Urban Redevelopment Authority (URA) of Singapore. This will give you trustworthy information about the future growth of this area, which can tremendously impact the price as well as the future rental yield of this property.
#5: Goods and Services Tax (GST)
Both sale and rental of commercial properties in Singapore are subjected to 7% GST if the developer or landlord is GST registered. If your company is a GST-registered company and is purchasing the commercial property, you can make claims for the GST incurred on the purchase. This will help you enjoy significant savings.
Smart Tip: However, if your company’s turnover is less than S$1million, GST-registration is on voluntary basis. Thus, you will need to check with the Inland Revenue Authority of Singapore (IRAS) about the eligibility to claim GST before committing to any commercial property.
Once you have found your ideal office, it is indeed a big load off your to-do list. The next part of getting your ideal office up and running is to embark on the necessary renovation works that involve space planning and suitable office furniture fit-out for you and your staff.
For more professional advice on cost-efficient and smarter ways to optimize your office space, do enquire with our professional and friendly team of consultants at Wilsin today!