A beginner’s guide to managing office rental budget
Frankly, how much you pay for rent depends on your business needs, and ultimately, your existing budget. Take the time to assess your needs, determine what kind of space works best for you, and plan your budget wisely.
How much should you spent on rent?
A nice office is great and can boost productivity, but the expenses involved in setting up your own office can add up quickly (especially if you’re renovating extensively). Ideally, your rent should be capped between two to eight percent of your gross income (not including your taxes and operating expenses).
By determining up front what your rental budget is (and any associated cost), you can streamline your search and focus on alternatives that you can afford. Most of us tend to spend beyond our allotted budget, so overestimate your expenses to allow wiggle room for additional expenditure.
Work + Store Tip: Even when you’re certain of your spending capabilities, it’s best to seek professional financial advice before making any major financial commitment.
Many coworking spaces offer private offices as well as open plan workspaces. A private office starts from $700 per person per month. Most are centrally located, within walking distance to the MRT, and inclusive of furniture, basic printing services, access to pantries, lounge areas, along with additional perks (discounts to services, networking events, etc.). There is no stamp duty or legal fees but additional charges often apply for meeting rooms usage ($30-$60 per hour).
A serviced office offers fully furnished and equipped cubicles (or rooms) for corporations with smaller teams (usually without the perks of networking events offered at coworking spaces). Serviced offices usually start at $350 and can go up to $1,500 per person per month depending on location and space size. Fees usually include basic amenities like furniture, internet, phone access, and business lounges.
Coworking spaces and service offices are best for entrepreneurs:
• Who don’t need a lot of storage (businesses without stocks or inventories)
• Seeking a temporary solution before moving to a permanent space
• Who prefer flexible working arrangements or are still testing the market
• Who don’t want to worry about managing a facility
Work+Store Tip: While the initial low start-up cost is appealing, coworking spaces and serviced offices charge monthly rent per person, and it can become very expensive for bigger teams. In the long run, you may end up saving more money by renting a conventional office space.
Conventional offices mostly come fitted with AC and standard light fixtures. Typically, rent for traditional office space includes fees per sq ft area, service charges per square foot area, and an additional seven percent GST (if your landlord is GST-registered).
Conventional offices vary greatly by location, and can range from $2.85 to $30 per sq ft. Most conventional offices offer leases with two to three years validity.
Unlike coworking spaces and serviced offices, conventional offices tend to have more hidden costs. When calculating your rent, don’t forget to factor in hidden costs which can include:
• Agent fee – Half to one month of rent
• Attorney fees
• Furniture and equipment
• Internet – Varies by providers
• Stamp duty – 0.4 percent of your total rent for the lease duration
• Security deposit – Usually two to three months
• Moving fees – Renting a van is cheaper ($300-$500) than hiring professional movers, but is not ideal if you have a lot of items. Plus, most conventional offices require insurance issued by your movers.
Conventional offices are best for businesses:
• With stable projected growth and predictable expenditure
• Wanting to build a stronger company culture
Work + Store Tip: Renting a conventional office space will require large initial capital outlay but also give business owners the reign to customise their office layout to maximise their business operations. You can reduce your upfront expenses by keeping your office décor minimal, opt for second hand furniture, or hunt for free tables at sgfreecycle.
Why is Work+Store different?
Rent at Work+Store units start at $350 per month (inclusive of facilities fee, utilities, and GST), and vary by configuration and size. Workspaces range from 50 sq ft to 800 sq ft with the availability of small storage space and additional mezzanine levels. Unlike most conventional workplaces, Work+Store offers a flexible lease with a minimum commitment of six months.
Work+Store units are best for businesses:
• In e-commerce or trading
• Who need accessible storage
• Who prefer flexible rental terms
• Looking for an alternative to conventional workspaces
Work + Store Tip: This option is a great compromise for first-time workspace owners requiring flexible space use. Costs per square foot is much lower than conventional workspaces, translating to a smaller financial commitment if you’re unsure whether moving out of your home is the right decision for your business. Learn more here.