Rental Offices vs. Traditional Offices: A Expert Guide to Their Pros, Cons, and How to Make the Best Choice!
In this article, we provide a clear explanation of the differences between rental offices and traditional offices, along with their respective pros and cons. You can quickly check which office type is the right fit for your company using our checklist.
Table of Contents
- What Are "Rental Offices"?
- Differences between Rental Offices and Traditional Offices
- Pros and Cons of Rental Offices vs. Traditional Offices
- Which Type of Office is Right for You? Check With Our Checklist!
- If You Have Any Questions, Consult "Rental Office Search".
What Are "Rental Offices"?
"Rental offices" are office spaces that are provided by an operating company with furniture, internet access, and other office environment services. Some operators also provide services such as receptionists, telephone answering services, and various business support services.
Differences between Rental Offices and Traditional Offices
Rental offices and standard traditional offices differ mainly in (1) Types of Contracts, (2) Cost, and (3) Tenant Screening.
(1) Types of Contracts
In the case of traditional offices, a real estate lease contract is concluded between the building owner (landlord) and the tenant company (lessee).
This agreement outlines details such as the lease duration (usually on an annual basis) and the details of restoration to their original condition upon termination. When leasing high-grade buildings, reaching such an agreement often requires a considerable amount of time.
In contrast, when it comes to rental offices, a "usage agreement" is exchanged instead of a lease contract. Many facilities (rental offices) offer monthly basis, allowing for more flexibility.
For instance, if you need short-term space for cross-departmental projects, rental offices offer the advantage of enabling a swift commencement of use.
(2) Cost Comparison
◾️Traditional Offices
Beware of initial charges that could reach several times your monthly rent!
Costs of Renting a Traditional Office
- Rent and Common Maintainance Fee (1 month each, paid in advance)
- Deposit (3-12 months' rent)
- Key Money (1-2 months' rent)
- Insurance Company's Commission Fee (1 month's rent)
- Brokerage Commission Fee (1 month's rent)
- Interior and Network Installation Costs
- Furniture and Equipment Costs
- Moving Expenses
The initial costs can vary depending on factors such as the grade of the building and the insurance company used, but at a minimum, you can expect them to be equivalent to six months' worth of monthly rent. The average rental rate per square meter in the five major wards of Tokyo is approximately 28,000 yen. So, if you want to rent a 50-square-meter office space in the city center, you would need to prepare over 10 million yen as an initial cost. (*As of August 2023)
Expenses will also be incurred when moving out!
When moving out, there is an obligation to restore the premises to their original condition, which may result in restoration costs. The regular cost rate per 1 Tsubo (approximately 3.3 square meters) is approximately 20,000-100,000 yen. As the size of the office space increases, the move-out expenses tend to rise, so it is essential to be cautious when moving out.
◾️ Rental Offices
Cost-Effective Start-up!
Costs of Renting a Rental Office
- Rent and Common Maintainance Fee (1 month each, paid in advance)
- Deposit (equivalent to 1-2 months' usage fee)
- Brokerage Commission Fee (equivalent to 1 month's usage fee)
Even in high-grade rental offices in the best districts, monthly fees are often relatively low-priced, and some facilities can be rented for as little as tens of thousands of yen, if you are considering using the space for a small number of people.
Zero Expenses When Moving Out!
Since tenants don't need to arrange interior work themselves, there's no obligation for restoration when moving out. Furniture and equipment are usually provided in advance, resulting in minimal costs both at the beginning and end of the lease, making it a cost-effective choice.
(3) Tenant Screening
When renting a traditional office, you will need to pass a tenant screening inspection by the building owner before signing a lease contract.
The screening process involves comprehensively assessing creditworthiness, considering factors such as the nature of the business, its future prospects, conducting credit checks, and reviewing financial reports.
In some cases, an interview may be required, and the move-in process may take a long time....
(Our agents will also assist you with your interviews, so please do not worry if you are considering moving into a traditional office).
On the other hand, with rental offices, the key points of screening are the nature of the business, the purpose of use, and the ability to pay. The screening process tends to be less challenging than for traditional offices since fewer documents to be prepared. you will know whether you can move in or not within a few days, as long as there are no deficiencies in the application.
Pros and Cons of Rental Offices vs. Traditional Offices
Rental Offices
Pros
- Cost Savings: Initial costs, monthlcy expenses, and exit fees can be kept low.
- Convenient Location: You can have an office in a location near major train stations or with a prestigious address.
- Quick Start: You can start your operations immediately after use.
Cons
- Shared With Other Users: Due to sharing with other users, caution is required in handling information.
- Potential Higher Costs: In the case of long-term usage, there is a possibility that it may become more expensive compared to traditional leased offices.
Traditional Offices
Pros
- Boosting Employee Ownership: They plays a role in enhancing employee's sense of belonging.
- Expression of Company Mission and Brand: You can express your company's mission and brand through interior design.
- Easy Security Management: Security management is more straightforward.
Cons
- Higher Costs: Standard traditional offices are more prone to becoming costly when compared to rental offices.
- Time-Consuming Setup: It may take more time to start operations in a new office compared to rental offices.
Which type of office is right for you? Check with the checklist!
If the number of "YES" is 4 or more... We recommend rental offices!
If the number of "NO" is 4 or more... Consider renting standard traiditional offices.
If you have any questions, please consult "Rental Office Search ".
In this article, we've explained the differences between rental offices and traditional offices, along with their pros and cons.
Currently, numerous companies offer rental offices, each with their unique features and pricing structures.
If you have concerns about how to choose the right rental office or if you're looking to find a rental office that suits your company's needs, please feel free to consult "Rental Office Search." Our office experts will provide you with the best recommendations from a wide range of options!
