Without a doubt, real estate is a big chunk of your company's operating expenses. Aside from your rent, there are other costs that contribute to your overall real estate costs. Here are the ones that you should not miss out on when you do your planning.
1. Rent Escalations
To beat inflation, landlords usually impose a rent escalation within your lease term. You likely will face a rent escalation at some point but when you can expect the costs to increase and how much it will change depends on your agreed terms with your landlord as they can structure escalations in either of the following ways:
Fixed increases where your rent goes up a specific amount at predetermined intervals. For example, your lease may specify that your rent will increase 5% of its value annually.
Inflation-based increases where your rent fluctuates based on a third-party index.
2. Common Area Maintenance Charge (CAMC) or Common Use Service Area (CUSA)
Many leases require you to pay CAMC or CUSA in addition to rent. Depending on the type of lease and the terms it contains, this fee usually consists of:
Upkeep and Maintenance
This is usually calculated based on the size of common areas in the building such as hallways, common toilets and elevators. The landlord will assign you a load factor based on how much of the building you occupy to determine how much you need to pay for CAM or CUSA.
Some landlords just straight charge you a fixed amount per square meter and will be calculated based on the size of your office to be paid monthly together with your rent.
3. Fit-Out Construction
Possibly the biggest part of your real estate costs is the initial CAPEX you need to spend on your fit-out construction which includes the design and build of your office. This also includes your IT infrastructure and your furniture. Highly depending on your company's requirement or branding guidelines, this can range from PHP 25,000.00/sqm to PHP 50,000.00/sqm.
In the Philippines, there are a few service providers who offer Build-To-Suit where they help occupiers by shouldering the CAPEX and amortizing the fit-out costs together with the rent. This is usually recommended for companies who need to protect their cashflow and at the same time outsource the process of building their office.
4. Permits and Administrative Costs
In occupying space, there are of course permits that you need to apply for such as your business permit, building permit and occupancy permit. Aside from the actual costs of these permits, there are also requirements that you need to provide which will also entail more costs.
5. Property / Facility Management
Aside from the space itself, the upkeep and maintenance of your space will still fall under real estate costs. It is important to determine how much you will be needing to make sure that your space will work for your company. How many managers should handle your daily office activities? How many security personnel will you be needing? How many cleaners? How many times do you need to clean your AC units in a year?
Conclusively, real estate costs will always vary depending on the type of operations your company has. More often than not, the number of employees will translate to a higher cost for real estate as naturally it requires more space. Its always best to consult your costs prior to setting up your office so that you are prepared for your expense and you can set up your working budget.
Consult with Office Pro Philippines. Preparation of your real estate cost forecast is one of the services we can provide you.
Office Pro Philippines is a Corporate Real Estate Consultancy and Service Solutions firm that is focused on the OFFICE SPACE.
We are the only OFFICE SPACE-FOCUSED real estate in the Philippines with more than 10 years of practice from our consultants.