Commercial Property for Rent
JUN 2021 | LAST UPDATED
Commercial property is one of the largest cost in operating a business, the evaluation and execution of any commercial office rental strategy for MNCs, SMEs and start-ups is critical.
FINDING COMMERCIAL PROPERTY
For most companies (big and small), when undergoing the commercial leasing process, market research is conducted according to the office brief both offline and online.
Service proposals are requested from agents (JLL, CBRE, Savills, Cushman, Colliers), or office search is conducted online through commercial property listing sites.
In both offline and online cases, securing zero conflict, full market coverage and institutional grade expertise are inevitably hit and miss.
The underlying truth in high performance commercial property is simply that the most attractive real estate opportunities are often short-lived, difficult to source, analyse and execute.
The simply answer is to utilise data, technology and institutional grade expertise to provide impartial and customised solutions for businesses. The solutions are collectively known as off-market opportunities.
Off-market opportunities and “shadow” space provide more market fluidity by allowing tenants to monitor opportunities that may be coming available within the transaction window which would not show up on any standard open market vacancy listing.
The breadth of options facilitate demand and supply, whilst minimising bidding wars in tight markets through private match making.
CORPORATE REAL ESTATE GOLD STANDARD
Access to opportunistic real estate solutions with a unique value proposition.
Strategic planning to enhance a firm’s short and longer term lease security.
Evaluation of any conflicts of interests, particularly with that of the agent and landlord.
TOP 5 REASONS DICTATING CORPORATE REAL ESTATE VENDOR SELECTION
Company mandated relationship
Management held legacy relationship
Lack of alternative market solutions
Risk associated with changing vendor
IS THE GOLD STANDARD ATTAINABLE?
The question is, how common are the KPIs achieved for occupiers within the multi-trillion dollar corporate real estate industry? The Tenants Network survey suggests it is rarely achieved, due in large part because generating high performance is not always the number one priority.
First, for many MNCs, the selection of a real estate advisor is often awarded through a global or regionally held relationship. For SMEs, the choice of advisor is often awarded locally.
In either case, there are a myriad of underlying factors that can dictate or influence the corporate real estate decision making process, for better or for worse.
COMMERCIAL PROPERTY FOR RENT | HONG KONG
COMMERCIAL LEASING TERMS | HONG KONG
- Typically non-binding and subject to contract.
- Tenancy Agreements are legally binding contracts specifying the detailed rights and obligations of both the tenants and landlords during the lease term.
- Typically the landlord’s solicitors prepare the lease agreement.
- Landlords of single-owned or Grade "A" buildings are typically less willing to accept major amendments and tenants are expected to accept the landlord’s standard format with minimal changes, although anything of material importance can and should be raised prior to signing.
Option to Renew
- When does the option right need to be exercised and under what conditions?
- How is the rent determined? Pre-agreed, capped/collared, open market rent (OMR) or Rent Review?
- Is this an option? A right of first offer or right of first refusal? A right of first refusal is more typical, although often only available to larger tenants.
- When does the right need to be exercised? When a new space becomes available, the landlord will give written notice to the Tenant with a right of first refusal over that space and the tenant typically has between 15 days to three months to accept that right.
- Hows is the rent determined?
- Does the expansion term end at the same date as the main lease?
- Expert or arbitrator?
- How is the rent determined?
- Is an alternative preferable? Such as bank gurantee?
- What is to happen to the deposit on sale of the landlord's interest?
- Does the tenant have to reinstate? The lease agreement generally requires tenants to restore the property to its original handover condition.
Transfer of lease
The landlord does not usually allow the tenant to do any of the following:
- Assign or sublet the lease;
- Part with or share possession of the premises with others, including with companies in the same group; and
- Change control of the tenant.
A breach of any of the above will give the landlord a right of re-entry and the ability to forfeit the lease. It is possible to negotiate changes to these provisions. If the landlord claims damages against the tenant for the breach and the tenant defaults, the landlord may claim against the guarantor (if any).
- If a landlord agrees to grant a sublet right, the maximum size to the sublet is specified in the tenancy agreement. The market standard is 20-30% of the total floor area.
- If landlord agrees to sharing with group or associated companies permitted? Are signage rights adequate?
Security of Tenure
- Under the Landlord and Tenant (Consolidation) (Amendment) Ordinance 2004, lessees do not have a right to continue to occupy the relevant real estate after the expiry of a commercial lease.
- Many leases include sale and redevelopment clauses which give the landlord a right to terminate the lease by giving a specified number of months’ notice to terminate, if the landlord wants to sell or redevelop the building.
- Typically, the lessor has to give at least six months’ notice in writing to the lessee. The lease will terminate upon the expiry of the notice.
- A lessee may also be forced to leave prior to the date originally agreed if the landlord exercises his right of forfeiture. The landlord must comply with the notice provisions of section 58 of the CPO (relief from forfeiture) unless the forfeiture arises because of non-payment of rent or insolvency.
- If the tenant fails to remedy a remediable breach and to make reasonable monetary compensation to the landlord’s satisfaction within a reasonable time of service of the notice, the landlord can proceed to enforce the forfeiture. The landlord can exercise the right of forfeiture either by physically re-entering the property, or by commencing legal proceedings for possession. If the landlord successfully obtains a judgment against the tenant, he/she will be able to apply to the Lands Tribunal or the appropriate Court for a Writ of Possession. Once the Writ of Possession is issued, the court bailiff will recover the possession of the property on the landlord’s behalf.
COMMERCIAL PROPERTY IN HONG KONG
PARTNER WITH SAVVI
SAVVI’s full market coverage together with our proprietary data & AI driven Tenants Network, ensure that your business is presented with the ideal office solutions and advisory services.
We provide zero conflict, institutional grade expertise and a single point of contact to support your business, throughout your entire business life cycle.
GREAT, HOW DO I START?
Register your office brief on this page and receive real-time alerts on commercial properties for rent delivered straight to your inbox within your transaction window or lease event.
Explore the most suitable options by registering your interest or providing feedback to fine tune your evolving office requirements with our match-making algorithms, or simply speak to your dedicated account manager allocated to you shortly after registration.
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