Beijing Office - Negotiating Points

Effective rental rate

To compare office space options, look at the effective rental rate. If your rent is RMB120/sqm over 24 months and you're getting 3 months free rent in a building where the management fee is RMB25/sqm. Then your effective rental rate is (RMB120/sqm X (21/24)) + RMB25 = RMB130/sqm. In addition you should compare the net usable area of the space you're leasing. Take into account less efficient curved walls and redundant niche spaces. To help you decide, we provide you with a comparative financial analysis of your final shortlisted options.

Rent free

This can be a fit-out rent free period before the lease commencement date or a rent free period during the lease term. For Beijing office leases, a 3 month rent free period is common for mid to high-end buildings while more affordable buildings might offer 1 month rent free. Some Beijing office buildings spread the rent rent free period over the course of the lease, for example, in January of every lease year. Note that in most cases, you'll need to pay monthly management fees during the rent free period.

Term

A longer lease gives you greater negotiating leverage. Most landlords prefer steady long term rental revenue. In Beijing, high-end office landlords expect a minimum 3 year lease. Landlords at affordable office spaces may eccept 1 or 2 year leases.

Move-in Date

Vacant space is lost income for landlords. You lose negotiating leverage if you ask the landlord to "hold" the office space for too many months in the future. On the other hand, finding a space at the last minute weakens your bargaining power as the landlord may think you're desperate. Start looking at buildings early to narrow down the options. For high-end office space, select and negotiate space 3-4 months before you expect to start renovations. For more affordable office space select and negotiate 1-2 months before starting renovations.

Your Company

Financial strength is important to landlords, especially at high-end properties. Beijing office landlords may ask for detailed corporate information. A high rating gives you more negotiating power. If you're a start-up company, then information about your principal investor will be useful. At mid-tier and affordable office space, this is not an issue. Note that landlords at new single ownership buildings are always keen to lease to well known anchor tenants in the hope that they in-turn will attract other tenants.

Tenant Fit-out

At Beijing's mid to high-end office buildings, owners are rarely willing to include fit-outs in a lease. Office space is leased to you bare-shell. At more affordable spaces this is sometimes possible, but owners will do this at cost, factoring the additional cost into the rent. There's rarely any financial benefit for you in having the landlord do the fit-out.

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