SINGAPORE OFFICE LEASING

AUG 2021|LAST UPDATED

 

FIND THE IDEAL OFFICE FOR RENT

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Renting an Office in Singapore

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OFFICE LEASING GUIDELINES

 
 

OFFICE TERMS

Lease Term

A standard lease term is three to five years.

Renewals

3 years (3+3 typical). Most leases include an option to renew for three more years at an agreed rent or at the prevailing market rent at the time of renewal.

Escalation

Rent is normally fixed, not escalated, during the term.


OCCUPANCY COSTS

Rent

Gross rents:

All rents in Singapore are quoted on a gross basis: i.e., they include a service charge for specified services, including building staff, building security, building repairs, air conditioning during normal office hours, elevator maintenance and common area cleaning. The tenant pays a 7% Goods & Services Tax (GST) on the gross rent.

Rent Quoted:

Rent for office space is quoted in Singapore dollars (SGD) per square foot per month.

Rent Payable:

Rent is payable monthly or quarterly in advance.

Rent Free

Tenants are normally given a reasonable rent-free period for fit-out, typically 1–3 months depending on size and complexity of the project, before the lease commencement date or before the rent commencement date, as negotiated.

Management Fee

Management charge is included in the gross rent.

Security Deposit and Guarantees

A minimal rental deposit is typically equivalent to 3-6 months' gross rent depending on level of paid up capital against the entity. This is sometimes more for a less credit-worthy tenant and is payable as follows:

  • Upon confirmation of the intention to lease space (upon signing a letter of offer), an initial security deposit of one month's gross rent is payable.

  • Upon signing the lease agreement or taking possession of the premises,the balance amount is normally payable.

  • The landlord also has the option to receive the full deposit upon the signing of the letter of offer.

  • The landlord refunds the deposit to the tenant upon lease expiration, subject to the tenant's due performance of terms and conditions of the lease.

  • The landlord reserves the right to deduct all costs payable by the tenant due to a breach by the tenant.

Taxes

Property Tax Increases:

Although the landlord pays the property tax levied by the Inland Revenue Authority of Singapore, a provision in the lease is usually included that allows the landlord to recover from the tenant any tax increase during the lease term which is attributable to the premises.

Stamp Duty

The tenant normally pays stamp duty and other incidentals in preparation and execution of the lease documents by the landlord.

Utilities

For electricity, bulk purchases by landlords are becoming more common. The tenant thus pays individually to the landlord based on their metered usage. The tenant needs to pay 7% GST on utility charges.

In the absence of this scheme, the tenant still pays directly to authorities for water, electricity and telecom services. The tenant must arrange with Singapore Power Services to install a separate utility meter and with Singapore Telecom to lay telecommunication lines within the premises. The tenant also needs to pay 7% GST on utility charges.

Car Parking

Tenants pay extra for parking. Class A buildings normally provide one space per 2,500–4,500 sq. ft. leased.

 

LEASE MECHANISMS

Option to Renew

Most leases include an option to renew for three more years at an agreed rent or at the prevailing market rent at the time of renewal.

Option to Expand & Right of First Refusal

This is sometimes granted. A right of first refusal is normally available on a one time basis and only to large tenants.

Right to Sublet

Subletting is rare and has to be pre-negotiated. Tenants require landlords' approval for subletting. Partial subletting is usually allowed although this is subject to the landlord's terms and conditions.

Termination or Break

Landlords do not give break options.

Reinstatement Provisions

A standard clause in the lease agreement requires tenants to restore (reinstate) the premises to its original condition, except for fair wear and tear. This clause is rarely negotiable.

Signage and Naming of Building

The landlord may grant this benefit to major tenants who lease over 30% of the building's net lettable area. This is typically provided at an additional cost to the tenant.


Laws & Practices

Laws

  • Council of Estate Agencies
  • Estate Agents Act
  • There is no significant legislation or law related to building development.
 

Associated Cost

Fit-out Costs

Fit-out costs for Class A or Prime buildings in major cities normally range from SGD 100–170 per sq. ft. including construction, furniture, wiring for telephones, data and electricity, design fees, etc., but excluding technology (i.e., excluding switchboard, IT equipment, photocopier, etc.).

Reinstatement

A standard clause in the lease agreement requires tenants to restore (reinstate) the premises to its original condition, except for fair wear and tear. This clause is rarely negotiable.

The landlord's solicitors normally prepare the lease agreement. Market practice is for the tenant to pay legal fees for both the landlord's lawyer and tenant's lawyer.

Agency Fees

These rates are typically fixed. If separate brokers represent the two parties, the brokers split the fees.

New Lease: Landlord typically pays one month's gross rent.

Lease Renewal: Tenant typically pays ½ month or 8–15% of savings during lease period.

Lease Termination: Tenant pays one month's rent.

Sublease: Sublessor pays one month's rent.

Purchase: Owner, or sometimes buyer, pays 1%.


Space Planning

Building Classification

Grade A: A landmark building in the CBD area with modern flexible layout and floor plate above 18,000 sf. The building size is above 300,000 sf and offers underground parking and good lift services zoned for passengers and goods deliveries. It offers high technical specification (such as raised floors, 24-hour cooling system) and good quality building services (e.g. security, CCTV), professionally managed. The building is located often in CBD and is in close vicinity to the public transport.

Grade B: Quality building with modern building services. Good-quality finishes and professionally managed.

Grade C: Average building with average building services.

Grade D: Deteriorating building, poorly maintained.

Office Areas Defined

Lettable area (NLA) as defined:

  • Includes carpetable area (i.e., the area available to the tenant for office use).
  • Includes space occupied by columns (i.e., pillars).
  • May or may not include corridors between elevators and tenant space.
  • Excludes areas occupied by toilets, elevators, shafts, part of exterior walls, and ground floor lobby space.

Efficiency

A typical ratio of carpetable area to net lettable area in a Class A building in Singapore is 90%.

Space Measurement

Space is measured and quoted as net lettable area (NLA) in square feet.

 
 
 

SINGAPORE PROPERTY nEWS