How Much Rent Should You Pay for Your Office Space?
As a tenant, it’s natural to wonder if you’re paying too much rent for your office space. After all, commercial rent is likely to be one of your largest business expenses (if not the largest).
So, it’s essential to understand how much commercial office space is worth and whether you’re paying a fair market rate for your premises.
How much is office space worth?
Variations in commercial rental rates are influenced by a host of factors, most notably:
- The size of the premises – across Australia and Singapore, commercial office space is usually calculated as a dollar rate per square metre or per square foot.
- Market supply and demand – when tenant demand for office space exceeds supply, rental rates increase (and vice versa). For example, commercial office tenants in Melbourne are currently experiencing significant rental increases, fuelled by strong demand, historically low vacancy rates, healthy employment levels and record population growth.
- Location – many people say that the three most important business decisions you’ll make are location, location, location. Whether it is foot traffic, brand visibility or connectivity you’re after, securing office space in a great spot will be critical. So, it’s no wonder well-located premises attract premium rents. The surrounding tenants and facilities of office premises can influence rental rates.
- The age and general condition of the premises – in general, the newer the premises, the higher the rent (assuming similar size, location and building facilities).
- The terms of the commercial lease – some rental rates may include the office outgoings (such as council rates and land tax), while the terms and conditions of other leases may require a tenant to pay these amounts as additional expenses. It’s essential for tenants to remain aware of any annual rent increases provided for on their lease and how these increases will be calculated (for example, in line with CPI or a fixed rate).
How do you know if you’re paying a fair market price?
The most important thing you can do as a tenant is to conduct thorough market research for comparable office space. That means analysing the rents of office premises that have a similar size, location and purpose.
You can source this information by collaborating with commercial property professionals, speaking to other tenants in the area and/or jumping online to do the necessary research.
When it comes time to negotiate your lease, keep in mind that market knowledge is power and will help you secure the best possible rent deal for your office premises.
How we can help
Tenant CS is a commercial tenant advisory service that caters to businesses across Australia (with a particular focus on office space in Sydney, Melbourne, Perth, Adelaide, Brisbane and Canberra), Singapore and the greater Asia-Pacific region.
We can analyse your existing or potential future office space options and lease terms to make sure you’re paying the right amount of rent for your commercial office space.
We monitor national office lease markets for a living, and we’ll save you time, money and the hassle of having to do all the research yourself!