Guide to Renting Office Space

Ordinary Office Space

Recommended for companies seeking a more consistent and long-term business base. The size of such an office can range from as small as 30 sqm. to over 3,500 sqm. Ordinary office spaces can vary from small sections within a building to an entire building. The conditions, form, and terms of an agreement vary depending on the owner and the size of the property.

When deciding on an office space, some aspects to consider are:

• Other occupants (any signs of crime syndicates, troublemakers, etc.)

• Size and impression of the entrance

• Efforts made towards earthquake resistance, capability to continue business under emergency situations (availability of back-up power generators, etc.) Disaster planning and evacuation route

• Type of A/C, available hours, extra fees for A/C use outside of the pre-determined A/C operation hours

• Security

• Height of the ceiling (Old Japanese buildings often have low ceilings; which is not suitable or practical for Westerners.)

• Shape of the property (Shape of the space, placement of pillars, etc.)

• Business hours of the building (availability at night, weekends and holidays, etc.)

• Restrictions on interior decorating/construction venders

Understanding the Lease

Terminology

Security Deposit (Shikikin, Hoshokin)

This is a refundable payment made to the lessor once a lease contract has been agreed upon. This amount to be refunded at the end of the lessee’s tenancy. The amount to be returned when vacating the property is calculated by deducting the ‘Restoration Fee’, ‘Fixed Amortization Fee’ (if applicable), and a general cleaning fee. Once the aforementioned fees are deducted, the remainder will be repaid to the lessee, usually within 3 weeks to 1 month from vacating the property.

Market Average :
For small to mid-size office ; 4-10 times monthly rent
For mid-size office or larger size office; 6-15 times monthly rent

Fixed Amortization Fee (Shoukyakuhi)

A non-refundable payment to the lessor, usually deducted from the security deposit when vacating an office.

Market Average : 0-2 times the rent, 0-20% of deposit

Renewal Fee (Koushinryou)

A non-refundable payment to the lessor, usually payable upon the renewing of a lease's terms.

Market Average: 0-1 times the rent.

Rent (Chinryou)

Usually expressed in both tsubo* (3.3 sq.m.) and sq.m. bases. Please check whether or not the nominal rent includes the management fee.

*TSUBO (Unique unit basis for area measurement) 1 tsubo is equal about 3.3 square meters, and the rental rate for office space is usually expressed in a "per tsubo" basis in Japan. Adapting to the tsubo measurement may enable you to understand a lessors’ leasing logic better, since profitability is usually calculated on a per-tsubo basis. 1 tsubo equals twice the size of 1 traditional tatami mat.

Management Fee (Kanrihi)

A fee usually insisted upon as it covers monthly expenses such as utilities and the cleaning of public spaces and elevators. Unlike the nominal rent, most management fees are rarely negotiable when it comes to decreasing the amount or waiving the management fee altogether.

Free Rent Term

A period that a lessor agrees to lease an office space rent free. In the event that rent consists of a combination of a nominal rent and management fee, a standard definition of ‘free rent term’ excludes the nominal rent part only, and the Lessee is still liable for the management fee throughout the term.

Sales Tax (Shouhizei)

Excluding organizations such as embassies, consulate offices, or other public or military service offices of foreign countries, all office lessees need to pay sales tax on rent, management fees, fixed amortization fees, key money, and renewal fees. The current tax rate is 10%.