When considering business space or office for rent in Singapore, understanding the terms and conditions in a tenancy agreement is essential. Leasing in Singapore follows a standardized process, with specific terminology unique to the market. Below, we outline these common terms to help businesses navigate the leasing process confidently.
Key Leasing Terminologies
1. Gross Rent vs. Net Rent
Understanding the difference between gross rent and net rent is fundamental in evaluating the total cost of leasing a space.
• Gross Rent: This is the total rent amount a tenant pays, which typically includes base rent, service charges, and other operational costs like maintenance fees.
• Net Rent: This refers to the base rent, excluding additional charges such as property taxes, maintenance fees, and utilities. Tenants should confirm what is covered to avoid hidden costs.
2. Security Deposit
A security deposit is a refundable amount required at the start of a lease to cover potential damages or breaches of the agreement. the tenant’s financial standing. In Singapore, this is typically equivalent to 3 to 6 months of gross rent depending on the lease term and the landlord’s requirements.
3. Lease Term
Most commercial leases span 2–3 years, with an option to renew. For larger, long-term commitments, leases may extend to 6 years but often include a rent review clause to align the rental rates with market conditions during the term.
4. Rent-Free Fitting-Out Period
Landlords often provide a rent-free period, allowing tenants to renovate the space without incurring rent, which is usually 4 – 8 weeks. Companies moving into business parks for rent often utilize this period to install specialized equipment or set up their facilities.
This is often offered as an incentive by landlords to attract tenants with an attractive effective rental rate especially in the competitive market. The rent-free duration also often dependent on the office size, rental rate, and length of the lease term.
Fitting Out Terminologies
"Underestimate your budget, overestimate your timeline—that’s how you stay sane during a renovation." -Anonymous
5. Bare Shell vs. Fitted Space
Many business spaces including office, warehouse or business park for rent come in bare or fitted condition:
• Bare condition : Includes basic infrastructure like ceilings, lighting, sprinklers, and air conditioning systems. In a lot of basic B1 / B2 industrial building, however, the unit can come totally in bare shell condition without any electricity switch board and false ceilings.
• Fitted Space : Includes additional features such as partitions, furniture, and cabling, ideal for tenants seeking ready-to-move-in solutions. But do note that a fitted space may not suit everyone’s operational requirements and at times, it can cost even more to remove and rebuilt certain structures compared to taking up a bare space and starting the renovation from scratch.
6. Fitting-Out Deposit
Before starting renovations, tenants must pay a fitting-out deposit. This ensures any damages or debris caused during the work are rectified. The deposit is refunded upon satisfactory completion of the renovations.
7. Reinstatement of Premises
At the end of lease expiry, tenants are required to reinstate the premises to their original or bare condition unless agreed otherwise with the landlord. This often includes removing fixtures, reinstating the flooring and repairing damages. However, there are circumstances whereby a replacement tenant like the existing renovations and hence would like the unit as it is. In this case, a takeover token can be given or waived.
Other Leasing Costs
"The devil is in the details" - Anonymous
Understanding other hidden costs associated with leasing ensures accurate budgeting and prevents unexpected expenses.
8. Administrative and Legal Fees
These fees cover the preparation of lease documents. Tenants are usually responsible for these costs, which vary depending on the landlord.
9. Stamp Duty
Stamp duty is a government-imposed fee on leases and is calculated based on the average annual rent and lease duration. The tenant is typically responsible for this payment.
10. Service Charge / Facilities Fee
Service charges, often referred to as the tenant’s contribution towards common area maintenance fees, are additional costs levied to cover expenses for maintaining shared spaces in a building. These could include cleaning, security, landscaping, and utilities for communal areas. Company looking for an office for rent or business park for rent in Singapore should account for this in their budget. Landlords reserve the right to adjust this fee during the lease, though such changes are rare within a lease term. This service charge is typically included in the gross rental per month.
11. Utilities and Telecommunication
It is very common that tenants will bear the cost of their electricity and telecommunications, including installation and maintenance. Many buildings offer centralized air conditioning with after-hours services charged separately.
12. Insurance
During renovation, the tenant is expected to take up a comprehensive public liability insurance against claims for personal injury, death or property damage or loss arising out of the tenant’s fitting-out works in the amount specified by the landlord for the entire duration of the tenant’s fitting-out works.
After the renovation period, the tenant is also required to maintain a comprehensive public liability insurance policy against claims for personal injury, death or property damage or loss arising out of all operations of the tenant in the premises, for an amount specified by the landlord. The policy is usually required to be held in joint names of the landlord and the tenant with a reputable insurance company in Singapore and at tenant’s cost.
13. Triple Net Lease (NNN)
A triple net lease is a leasing arrangement where the tenant is responsible for paying all expenses related to the property, including property taxes, insurance, and maintenance, in addition to rent. This arrangement is common for standalone properties whether it is a commercial office or industrial building.
Flexibility and Renewal Terms
"Failing to plan is planning to fail." – Benjamin Franklin
14. Option to Renew
An option to renew clause gives tenants the right to extend their lease for a specified period under pre-agreed terms, usually 1 to 3 years. Renewal terms are negotiated 6 months before the current lease ends, based on prevailing market rates. This is particularly beneficial for companies in long-term office for rent arrangements who want stability and continuity.
15. Sub-Leasing
A sublease occurs when a tenant rents out all or part of their leased premises to another party. Subleasing is often an option for companies that no longer need the entire space but are locked into a long-term lease. However, in many of the tenancy agreement, sub-leasing is prohibited unless explicitly allowed in the lease. However, inter-company arrangements within related entities are often permitted.
16. Liability Insurance
Landlords often require tenants to obtain liability insurance to cover damages or accidents occurring on the leased premises. This is mandatory for almost all commercial leasing agreements in Singapore.
17. Rent Escalation Cap
This clause sets a limit on how much rent can increase during the lease term, providing tenants with some financial predictability. This could be based on inflation rates, market reviews, or a fixed annual percentage. Tenants considering long-term office for rent should account for such escalations in their financial planning.
18. Assignment of Lease
An assignment of lease happens when a tenant transfers their lease obligations to another party, effectively stepping out of the agreement. This is common in situations where businesses outgrow their office for rent or restructure their operations.
Choosing The Right Space
"The key to a successful outcome is flexibility. Knowing how to accommodate to different situations is key." – Anonymous
When selecting an office for rent or a business park for rent, consider the following factors:
19. Floor area (size) required
Floor area includes wall thickness and columns and is typically quoted in sq ft or sqm. It’s crucial to verify the usable space to ensure it meets your business needs. Typically, the calculation of the space required depends on how much room a headcount will need and whether there will be any amenities area, such as meeting room, conference room, display and demo area, pantry and storage. As general rule of thumb, an standard space planning should allocate about 100 – 130 sq ft per person with a 10% buffer to err on the side of caution.
20. Accessibility and Amenities
Proximity to MRT stations and highways, availability of nearby amenities, and additional services like auxiliary air conditioning for server rooms can significantly impact tenant satisfaction.
21. Location-Specific Incentives
Business parks like those at Changi Business Park, International Business Park, Science Park or one-north may offer lower rental rates and better working environment closer to academic institutions and public key research institutes compared to commercial office building in the city center, provided your company’s trade and activities qualify. The location of business parks, however, are located at city-fringe area, albeit they are still very well connected with the transportation systems and amenities.
Conclusion
"Measure twice, cut once." - Proverb
Whether you’re looking for an office for rent in Singapore’s city center or a business park for rent in areas like one-north or Science Parks, or warehouse for rent at Jurong or Changi understanding commercial leasing terminology can simplify the process and help secure the best deal for your business needs. Knowledge of terms like gross rent, reinstatement obligations, and fit-out periods ensures informed decision-making, fostering long-term success in Singapore’s competitive commercial real estate market.
FAQ About Leasing Procedures in Singapore
How does leasing process typically start in Singapore?
The leasing process often begins with a Letter of Intent (LOI) that outlines the proposed terms, including the rental rate, deposit, duration, usage and handover condition of the unit. Once both parties agree, a Tenancy Agreement (TA) with legally binding terms will be prepared.
How to secure favorable terms to lease business space in Singapore?
To secure favorable terms :
1. Understand Market Trends : Stay updated on rental rates for office for rent and business park for rent spaces in your preferred areas to negotiate effectively.
2. Engage a Professional : Consider working with a real estate agent or consultant familiar with Singapore’s leasing market to simplify the process. You can call us for free consultation to discuss your space requirements. There is no agent fee payable at all.
3. Review Lease Agreements Thoroughly : Ensure you understand all terms, especially those related to costs, termination, and renewal. It is also important to discuss on the length of the rent-free fit-up period for complex renovations.
Does rental rates normally include service / facility fee?
Yes. Rental rates in Singapore is normally quoted to include service fee or commonly known as facility fee, which typically refer to the maintenance, security, utilities and cleaning services of common areas. See point no. 10 above.
How big is the office space you should rent?
As general rule of thumb, a standard office space planning should allocate about 100 – 130 sq ft per person with a 10% buffer to err on the side of caution. The size required is also dependent upon whether the work area required is going to be compact or spacious and whether there are common spaces such as pantry, chill-out area, meeting rooms, conference room, director’s room, showcase or product demo area, reception etc. It is also good to budget additional 10% of extra space, if budget allows for future expansion in near term e.g. within 1 year time.
Should I look for a fitted or a bare unit?
Most of the prospective tenants we serve would like to have a fitted unit in order to save renovation costs. However, each company has their own operational requirements. Hence, the fittings that are left over by previous tenant may not be suitable for the incoming tenant. The cost to remove certain fittings and retrofit it with new requirements may also involve a large sum. Hence, you can choose a fully fitted unit provided if you can accept the condition as it is or if there will only be a minimal re-design or cosmetic touch-up to the space.
How much does it cost to rent business space (Business Parks, Office, Premium Industrial buildings, Factory and Warehouse) in Singapore?
Please refer to business space rental rates guide from this Page.
