How to sublet your office in Hong Kong
With the current COVID-19 pandemic, most people have been asked to work from home so as to curb virus transmission rates. Furthermore, it is very likely that social distancing measures will be implemented worldwide for a year or possibly even longer. This has greatly affected businesses, as their offices are no longer in use although they are still paying rent, plus several companies have had to downsize to be able to meet their profit margins.
Now that people are slowly starting to go back to work around the world – with social distancing measures in place – many companies have realized that they have plenty of extra space in the office due to downsizing, as well as the fact that a significant amount of people prefer a remote work model, whether for convenience purposes or due to the fear of contracting COVID-19.
In this article, we’ll look at how your business can offset some of your rental costs by subletting the extra spaces and shifting towards a shared office model. Don’t fret – we’ve done all the background research for you!
The legal aspect
Subletting your extra office space may not be legal depending on the terms and conditions set out in your lease agreement. You could incur several legal fees if you sublet your office spaces without permission from your landlord – which would defeat the very purpose of subletting.
The best way forward would be to initiate a discussion with your landlord and request permission to sublet. Be sure to stress the importance of saving costs during the current pandemic – after all, several industries have been severely impacted and your landlord will likely also have concerns about whether you will be able to pay for the office space. Overall, it is a win-win situation as you get to offset some of the costs of renting a huge space you aren’t fully using, and your landlord still gets his full month’s rental. He may have some concerns about allowing essential strangers to use the office space, but we’ll discuss that in the next couple of sections.
We’ve collected Sublease Agreement Templates you can refer to when drafting the exact terms and conditions for the tenants that you sublet to. All contract templates are free for download!
Protect yourself and your workspace
Your tenancy agreement when subletting should include a clause that specifies tenants are liable for any damages caused to the property. This is extremely important in shared office spaces as it will protect your business – after all, you don’t want to pay to clean up or fix someone else’s messes! This will also help reassure your landlord as your tenants will be on the hook for any damages and therefore will likely be more careful and respectful of your office space.
There are two ways to go about this – you must ensure that either your tenant’s insurance will cover the damages from a sub-tenant, or stipulate that the sub-tenant must get their own insurance, which is the more ideal option for long-term sub-leases. To help protect yourself with this type of insurance in Hong Kong, check out Company Cover, as they provide excellent advice and guidance to ensure you are fully protected.
Selecting your sub-tenant
Selecting the appropriate sub-tenant is an extremely important aspect of subleasing. The usual concerns when subleasing do apply, such as ensuring your tenant is able to pay rent on time and that they will not cause significant damages to your property (after all, even if they are liable, it can often be a headache to sort these types of issues out). Additionally, when subletting part of your office space, you need to ensure that your tenants are not from a competitor’s organization, otherwise they may get confidential information on your organization.
Therefore, it is essential that you vet your sub-tenants thoroughly before allowing them to sublet your extra space. Do thorough background checks and opt for tenants you have synergy with so that sharing your office space will be a harmonious experience. Following a strict vetting procedure will also reassure your landlord – so be sure to inform him of this when you initiate your discussion about subletting.
Another thing to note is that advertising your extra office space may not always be a good thing as it will send a signal to your competitors that your business’s cash flow is less than ideal. Plus, it will also attract plenty of people with bad intentions who would like to spy on your company and learn more about its inner workings. FLYDESK offers a strict, thorough and discreet vetting process for any potential sub-tenants through our wide network so you can ensure only the best tenants come to you for final approvals.
It’s best to check coworking rates around your office’s location to get an idea of what prices to charge. As a rough guide, dedicated desks in open spaces in Hong Kong go for 3,000 – 6,000 HKD per month while daily coworking hot-desks go for 150 – 400 HKD per day. Of course, this depends on your neighbourhood and the quality of services your office provides – for example, if you allow access to your pantry and have free tea and coffee, a balcony or other such common areas for people to relax in etc, you can price your extra space for much more than if you offer no additional services. Areas in or close to the Central Business District or in neighbourhoods with many dining and entertainment options around can also be priced higher.
Subletting meeting rooms is also a profitable option, as while several businesses may choose to continue to follow a work-from-home model, they will occasionally need spaces for their teams to meet and discuss projects, or to meet clients. Typically, meeting room rentals go from 150 to 300 HKD per hour, but this can be increased depending on the capacity you offer.
FLYDESK can also assist you with pricing your office spaces appropriately.
Duration of your sublease
Short-term subleases require more work as you will continually have to vet tenants, and you will take on additional risks with every new tenant. However, they are generally more profitable. Long-term subleases are also a little dicey, as the future is quite uncertain at the moment. Therefore, the best option is a flexible lease for up to two months after which it can be renewed if you choose to do so.
Remember – you are in control here! You can also choose to offer renewable weekly options to reassure those who aren’t entirely certain about whether subletting your office space is the best choice for them, plus, this gives you more time to filter more tenants. It’s best to keep your sublease as simple as possible so you don’t have to go through much hassle.
Clearly outline the rules and regulations of your workspace to any prospective tenant (and be sure to include them in the sublease!). Some things you may want to consider are rules about usage of equipment such as printers, coffee machines etc. You may also want to implement a dress code, as well as other rules such as ensuring the last person to leave the office turns all the lights and air conditioning off and other such guidelines to ensure your tenants behave respectfully and appropriately. For more information on guidelines for coworking and shared office spaces, check out this article.
You will also need to come up with a system for the booking of meeting rooms to avoid clashes and may need to place some restrictions on internet usage.
Overall, subletting your extra office space is a great way to save on your business’s expenditures while also offering others affordable spaces to work on a flexible basis. Of course, you will need your landlord’s approval and ensure that strict rules and guidelines are set so you don’t end up in any sticky situations.
While this is just a general guide, if you’re interested in subletting your extra office space, contact us at FLYDESK and we’ll help you work out all the details specific to your business.