5 Feb 2016
Costs of a Hong Kong Office
Office rentals: Based on factors such as ancillary facilities, location and quality of management, office premises in Hong Kong are generally classified into:
Grade A commercial buildings
- rental level: highest
- locations: Central, Admiralty, Tsimshatsui (core business districts)
- size of office unit: a few thousand to tens of thousands sq ft
- suitable for: banking, money and finance, commercial and professional services
- management: by property developer or large-scale professional property management company appointed by developer
- ancillary facilities: professional property management, various commercial ancillary services, communications, shopping, transport etc., all of prime quality
Grade B commercial buildings
- rental: medium range
- locations: Wanchai, Causeway Bay, North Point, Quarry Bay, Mongkok (peripheral business districts)
- size of office unit: several hundred to several thousand sq ft
- suitable for: various trades and industries
- management: by small to medium-sized management company owned or hired by the landlord. Hence, tenants can expect greater flexibility in price negotiation
- ancillary facilities: overall layout is generally inferior to grade A offices, however, a full range of commercial services is usually available
Renovated factory buildings or trade/industrial centres
- rental level: lowest
- locations: Kowloon Bay, Cheung Sha Wan, Kwai Chung (industrial districts)
- size of office unit: several thousand to tens of thousands sq ft. Some landlords may sub-divide units into smaller ones of about 100-200 sq ft for leasing
- suitable for: manufacturing, import/export or various trades and industries desiring for some control over rent
- management: cannot be compared to commercial buildings
- ancillary facilities: cannot be compared to commercial buildings, however, basic communications facilities are available
Tips from HKTDC: Leasing
Renting office space in Hong Kong involves certain procedures and requires upfront payments. Knowing where the bargaining points are can help reduce much upfront payment.
Procedures of leasing
1. Search for an ideal space, negotiate the rental with landlord and finalise the leasing agreement
- Put a cap on rental increase upon lease renewal: A leasing period generally lasts for 2-3 years. If a tenant has decided to have a longer leasing period, he or she can negotiate with the landlord the range of rental increase upon lease renewal and have it laid down in the agreement.
- Ask for a reasonable rent-free furnishing period: A tenant can negotiate with the landlord for a rent-free furnishing period which generally last for 15 days to 2 months and have it laid down in the agreement.
2. Sign a lease and have it stamped
- A lease needs to be stamped by the Inland Revenue Department of Hong Kong and the stamp duty paid accordingly in order to be enforced legally.
Other leasing costs: According to leasing laws and practices in Hong Kong, a tenant also needs to consider the following costs and expenses apart from rent:
- upfront costs
- holding deposit (equivalent to 3 months’ rent)
- first month’s rent (1 month)
- air-conditioning fee (3 months, as calculated by per sq ft of renting space)
- management fee (3 months, as calculated by per sq ft of renting space)
- rates and government rent: as calculated by the rateable value assessed by the Rating and Valuation Department, and payment made quarterly
- stamp duty: calculated at rates which vary with the term of the lease and the annual rental:
- not more than 1 year: 0.25%
- 1-3 years: 0.5%
- more than 3 years: 1%
- legal fees: payment of legal fees is required if the lease is signed in a law firm, which is the general practice of grade A office space although individual landlords and landlords of industrial and trade centres may consent to sign a standard lease and thereby reducing costs.
- estate agents’ commission: the common practice is half of one month’s rental. This fee will be incurred if agents are appointed to act on one’s behalf.
Setting rental levels: Rental levels go up and down in Hong Kong due to a number of factors, not least the constant short supply of commercial office space. Investors wishing to get hold of the latest rental level can make enquiries with estate agents or relevant persons.
Factors affecting rental level:
- Market supply
- Ancillary facilities
- Property management