Location is the key aspect for any commercial setup, be it an office or a retail space. Location is decided based on various factors such as accessibility, demand, catchment and competition. For instance, an office space in Guindy, Chennai is considered central due to ease of access to airport, hotels and every other part of the city. It has metro rail connectivity and good infrastructure in terms of internet, power and allied services.
Size is predominantly based on the format of operation and also the number of employees/ staffs. For a large IT/BPO office, it is imperative to have a single large floor plate of office space for ease of management and maintenance. This is not so the case with an admin or a corporate office which can afford to operate from relatively smaller floor plates for different divisions placed on multiple floors. Real Estate and rental values being high, it is important to get the perfect size to avoid wastage of financial resources and also not to keep it too cramped for operations. Post Co-Vid-19, sizes are getting recalibrated to provide for work from home and as well as for physical distancing.
LEASE OR BUY
This is a decision that has to be taken depending upon the location and also the intended years of operation. For instance, for a firm which intends to operate for a long duration in a prime locality, it makes financial sense to own a property instead of paying rentals that keep getting incremented annually and in a location that has potential for further appreciation in capital values. Also purchase is a better option, provided the interest on the same or opportunity cost of the money is lower than appreciation potential. It definitely makes more sense to rent a property where the rentals per annum are lower than 5% of property value.
BUDGET & RENTALS
Properties which are better located with better facilities always command a higher rental.
The rentals depend on factors such as:
- Location – a property in Central Business District(CBD) always commands a higher rental
- Quality of the structure/ property – depending on age and suitability, the rentals vary.
- Specifications – a property with better features will command a better rental. For instance, a Grade A office building always commands a higher rental. In the case of retail, a space in the ground floor always commands the highest rental. No of parking slots, floor level, age of the building play an important role in the same. Many clients look for a marquee property in a city to match their company profile.
Availability of public transport systems and ease of access for the workforce is the most important criteria for any commercial setup. For instance, an office space in Guindy, Chennai is ideal as it well connected by road, rail and metro. In the case of a retail setup, a location like T.Nagar is ideal as it is not only well connected but also is centrally located and caters to the population living in every part of the city.
This is expressed in terms of total number of car parks compared to the size of the building. Most generally every commercial building has a car parking ratio of 1:1000 which technically means that there is 1 car parking space for every 1000 sqft of leasable space (super built up area) on offer. Parking spaces are most generally in the basements, stilt level of the building and open land areas around the building
NOC & APPROVALS
It is important today to ensure that a property has complied with all statutory compliances and the following basic approvals are in place
- Land & Building approvals including local body approvals
- Fire and (rescue) services department – No objection Certificate (Fire NoC)
- Other NoCs as may be required for specific operations
FINANCIAL TERMS & REGISTRATIONS
Rentals are not the only factor that impact a wise financial decision. There are several other terms that come into a contract. These include refundable security advances, term of lease, lock-in period, increments on rentals, maintenance, notice period for vacation, rent free period, registration procedures and costs thereon etc. It is important to know fully what is on offer!
LITIGATION ON PROPERTY
It is imperative for any tenant or buyer to do due diligence on all legal aspects before entering into any contract so as to avoid legal hassles at a later date. Litigations can range from title disputes, claims from legal heirs, wrong representation by the seller, improper description of the property, statutory dues, financial claims etc. It is best advised for a client to seek the advice of a lawyer in this regard.
MARKET INTELLIGENCE AND CHOICE OF PEOPLE TO WORK WITH
When you step into a new city / town or an unfamiliar location, take help to find a trust-worthy agent/consultant, local real estate broker or realtors. Gain from the specialized knowledge and market information that a broker provides from his experience on dealing with industrial real estate/ warehousing in the area and this will help you avoid several unknown and localized pitfalls and prepare you to get the best property and the best deal on the same. Also check on the background and history of the broker, his capabilities, systems, processes, database, online trust factor and relationships with local landlords.