Sep 2023

Leasing Fitted Office Space – What tenants need to know

Fitted Office Space

When looking for office space for rent, most tenants should start with checking whether there are any fitted office spaces available for lease.

Why – The Benefits include:

  • With average fitting out costs at circa S$80.00+ per sq ft, there could be substantial cost savings.

  • Fast tracks the entire moving process.

  • Simplifies the whole operation – no need to project manage the whole procedure.

  • The tenant knows what he is getting and allows flexibility for future moves without incurring massive write-off costs.

  • Minimises financial risk, in the event of building re-development or change of owner or change of use.

Whilst the majority of tenants start off by looking for ‘fitted-out’ space – 9 out of 10 end up leasing bare shell space. If you are one of the lucky 10% to find the perfect fitted unit, all the above benefits will be gained, so it is worth checking.

The Challenges

Why do only 10% of tenants manage to secure fitted space? Well, basically it is not that easy. You will definitely need a good agent like Corporate Locations to know of all the best options. There are a number of reasons on why it so challenging:

  1. Much depends upon what is around at the time you’re looking, and knowledge is king here.

  2. Fittings may be great, but not all other criteria match, such as size, entrance, location, rent etc.

  3. Sometimes there is just as much work involved in altering a current fit-out, you might as well have started from scratch.

  4. The outgoing tenant might be unrealistic about a ‘take-over fee’. It should only be a nominal figure – there is not much of a market for used furniture.

The Pitfalls

Tenants do need to know what the potential pitfalls are, such as:

  1. The Reinstatement Clause. When a tenant takes over a fitted unit, they will also be taking on the obligation to reinstate to the original bare condition, if they move again without a replacement tenant lined up. No landlord wants to incur the cost of stripping out what one of his previous tenants put in.

  2. When taking on the obligation to ‘make-good’ to the original bare condition – the new tenant must know what the original condition was and what is the reinstatement cost – typically $18 per sq ft, but it can be much more. Most of the cost is in the ceiling, sprinkler heads, air-con ducts etc.

  3. Approval for current fit-out – did the previous tenant secure all the necessary approvals for the original fit-out works?

  4. New fire / electric and building regulation approvals may still be required because the current certificates will be under the previous tenant’s name.

  5. The costs of further alteration works can be significant, so caution is needed.

To conclude, the benefits of leasing a fitted office unit far outweigh the pitfalls, but there is no one-size-fits-all solution. Corporate Locations should know which tenants are looking to move in the foreseeable future, even before their landlords know, hence they will be giving up their current fitted space.
We are dedicated in our commitment to our clients and when you define it, we’ll find it.

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