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Hong Kong Office Premise Leasing Guide

Hong Kong is a bustling business hub, and there is just something about this exciting city that has foreigners from all over the globe keen to set up a business in the country. For an investor, one of the biggest considerations would be the premise where their business is going to be based. This guide will highlight all the key points which you need to know when it comes to leasing an office premise in Hong Kong.

What to Consider When Leading an Office Premise

There’s a couple of things which need to be considered when looking for a new premise to lease in Hong Kong. Especially for office premises. These are going to be the base of your business operations, and thus, careful considerations should be made to ensure you’re selecting the perfect space.

When deciding which premise is going to best suit your business, here’s what you need to consider:

If the size of the space is going to be sufficient for your business needs.
Where you will be conducting most of your business (home, shop managed workspace, factory, office).
The convenience of the premise location (especially if your business relies on passing trade).
Renting versus buying, and the cost involved with both options.
The security requirements of the premise.
The insurance costs involved.
What the local crime rates are like (if any).
Car park facilities.
Running and operational costs.
Maintenance costs.
Refurbishment costs (phones, office equipment, fax machines and furniture).

About Hong Kong’s Leasing Customs and Practices

If you intend to rent a premise in Hong Kong, there are certain leasing customs and practices which you need to take note of. Here are the important key areas to remember:

Your tenancy agreements are a legally binding contract. The agreement will specify all the detailed rights and obligations which both landlord and tenant must abide by.
Rental prices are quoted in Hong Kong dollars per square foot on the gross, lettable or net area. Rentals are quoted and payable monthly in advance. Prices usually include management fees, rates, service charges and any additional costs.
Rent and other various charges in Hong Kong are based on three measurement units. It is advisable that tenants familiarise themselves with the differences to compare the true cost of the actual premise space. The three units are lettable area, net area and gross area.
Two to three years is the normal pre-agreed office premise lease term. Rental prices are fixed. Tenants who occupy larger premises tend to prefer longer lease terms (eg: 6 to 9 years). Rent reviews are held at the end of every third year in line with the current prevailing rental rate in the market.
Upon expiry of the original lease terms, tenants do have the option of negotiating the lease renewal on the original lease terms.
Landlords offer grace periods (rent-free), which allows time for the new tenants to fit in and adjust to the premises. The length depends on the size of the premise and the prevailing market conditions.
Service charges cover air conditioning supply, building management, upkeep of common areas and cleaning. These costs are calculated into the area of the premises which are rented. Charges may be quoted to the tenants based on a per square foot per month basis. These charges are usually non-negotiable and may be revised from time to time.
The tenant will be required to pay a non-interest bearing cash security deposit. This amount should be equivalent to two or three months’ rental, and inclusive of service charges. Tenants will be required to settle this amount at the time they sign their tenancy agreement. The deposit will be refunded once the lease has expired.
The landlord will provide some items, known as landlord provisions, which will be free of charge.
Both the landlord and tenant will share the one-off Stamp Duty cost on the conveyance on sale, agreement for sale of residential property, and the lease of immovable property. All documents which are chargeable will stamp duty must be presented either in person or via post to the Stamp Office of the Inland Revenue Department for stamping.
In terms of rates and government rents, these are charged at a percentage of the rateable value. This would be the estimated annual rental value of a property. The current rates percentage charge sits at 5%. As for government rent, this would be paid by the owner. In return, that owner would have the right to hold and occupy the land for the term stated in the lease document. The rates are calculated at 3% of the rateable value of the property and will be adjust in step with any subsequent changes in the rateable value.
Both landlord and tenant will have to bear the legal costs involved on their own.
The tenancy agreement will have provisions for insurance and liabilities. Tenants will be responsible for covering any additional costs.
All tenants will be charged with an agency fee when leasing their premises because they have been introduced to the premise by an estate agents. It is common practice for agents to charge both the landlord and the tenant, and the fee could range between half a month to one month’s rent.