What are the office requirements for my UAE company?

February 4, 2017

Office space. Not exactly a word pairing that gets the entrepreneur’s heart racing. For many in fact, it’s a term that brings about feelings of dread – particularly for entrepreneurs who are familiar with the potentially high costs that come with any new office.

But whatever your feelings towards office hunting, it is a necessary part of setting up and running any business.

While there is probably plenty of truth in the old adage – good offices aren’t cheap and cheap offices aren’t good – in actual fact the UAE, and Dubai in particular, compares well to other international business hubs.

According to a report released last year – Knight Frank’s Skyscraper Index – the average cost of renting a skyscraper office in Dubai is around USD 43.50 per square foot. Now of course, there are plenty of cheaper options as not everyone needs to rent an elite office right away, if ever. However, this figure is a great indicator of the value for money available in Dubai in comparison to the rest of the world.

Take another international business metropolis, Hong Kong, for example. Here a similar office rental would set you back over five times the Dubai price – coming in at USD 255.50 per square foot. In fact, Dubai outperforms all other business powerhouses around the world, working out cheaper than New York (USD 153), Tokyo (USD 125), London (USD 122), Singapore (USD 93.25), Beijing (USD 67) and Mumbai (USD 52) among others.

So, now that you’re satisfied you are getting your money’s worth, let’s look at the next major consideration: What type of office do you need?

Here in Dubai, there are three common office types for entrepreneurs to choose from: Service, free zone and onshore. The one that’s right for you will depend on the type of business you run and what you need from your office.

In Hong Kong, office rental would set you back over five times the Dubai price – coming in at USD 255.50 per square foot.

What are my office space options?

The type of office you require will depend on a number of factors: Are you registered in a free zone? Do you need room to expand? Do you require any inclusive services? How long a lease do you need? Do you need to be in a specific location? And so on.

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Once you have established your exact needs you can begin looking into the types of office space available to find the right fit.

Let’s look at the options:

Serviced offices: As the name suggests, a serviced office is one that is owned and maintained by a third party. Serviced offices give entrepreneurs everything that is needed to run their business straight away – desks, phone and internet access, reception cover, etc – in return for a monthly fee that usually makes up part of the rent.

The main benefit of a serviced office is that it offers entrepreneurs an affordable way to achieve a professional and slick office presence. What’s more, as the majority of serviced offices are ready to move into, you can set up in your new premises in a matter of days.

There are further benefits for the jet-setting entrepreneur too. As many serviced offices are owned by international chains, most have other premises and business lounges located around the world for use by all members.

Serviced offices tend to suit entrepreneurs who need to operate outside of a free zone, are looking to move in straight away, and wish to keep initial costs down.

Free zone offices: Once again, as the name indicates, these are offices located within free zones. Most free zones require businesses that set up there to take an office space of some kind depending on your activity, visa eligibility and licensing jurisdiction. If you have employees, there are also rules regarding the minimum amount of space you are required to rent.

Your business activities will usually determine in which free zone you are able to set up. For example, the UAE is home to medical free zones, media free zones, commodities trading free zones, and many others. Naturally, should your business be registered in a free zone, then this is the right type of office for you.

Onshore offices: For onshore businesses – those not located within a free zone – there are many more options available. As well as serviced offices, onshore companies can take their pick from mixed-use dwellings (buildings with both residential and commercial tenants), shell and core (empty offices that require fitting and decorating), and sublets.

One of the main benefits of renting an onshore premise is that you are free to negotiate your desired rental period, whereas serviced and free zone offices may require you to sign up to a minimum length of tenancy.

For those looking long term, many landlords offer substantial discounts for longer periods. However, it is not advisable to tie yourself in for too long and if you do, try to negotiate in advance for a fair penalty for early termination of the lease.

One of the main benefits of renting an onshore premises is that you are free to negotiate your desired rental period, whereas serviced and free zone offices may require you to sign up to a minimum length of tenancy.

You should also keep in mind that when renting an onshore office, bills for services are charged on top of rent and in many cases are your responsibility to set up in the first instance. This is particularly true of shell and core offices, which also require furnishing and decorating.

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For entrepreneurs who want a ready-made office and wish to pay one fixed price for rent and utilities, serviced offices are a better option.

How to stop costs getting away from you

The first thing to establish when renting any office space is what’s included in the price you are agreeing to pay. Many serviced offices will include utilities such as phone and internet, as well as services like cleaning and use of shared equipment such as printers and fax machines in the price of the rent. Meanwhile, others will add a service charge on top.

Where the latter is the case, it’s important to know what is included and what is not. For example, it is not uncommon for serviced office providers to charge a fixed cost for all extras – call handling, use of common areas, server space and the like. If you don’t require these services then make that known before you sign on the dotted line.

The first thing to establish when renting any office space is what’s included in the price you are agreeing to pay.

Where free zones are concerned, inclusions will differ from location to location but most are set up for businesses to move in with relatively little fuss – with internet, phone lines, desks and other standard amenities.

There is even more variation from place to place when it comes to onshore offices. While some may be connected and ready to go, others are simply shells – four walls that need fitting, furnishing and decorating – the cost of which lands with you, the tenant. So, while the advantage of these types of spaces is that you are able to decorate it to your own tastes and partition the space to your exact requirements, the downside is that only the shell itself is included in the base price – not the cost of customising it – so it isn’t always the cheapest option.

Finally, whatever type of office you choose, don’t get tied into anything excessively long. While there is no ‘standard term’ for office leases, it is common for them to be negotiated over a period of three or perhaps five years – though many serviced offices offer month-to-month, weekly, or even daily rental. To avoid getting stung with office space you don’t need or an early exit fee should your circumstances change, always consider the short- and long-term picture when renting.

Office space: Getting it right

The type of office you go for will have a lot to do with the type of business you operate. Should you decide to set up in a free zone, for example, then a free zone office becomes the logical choice.

Equally if you have no desire to fit and decorate your new surroundings – or be laden with the administrative duties of setting up amenities and the like – then a serviced office is probably your best bet.

Whatever type of office you choose, however, it is important that it adequately reflects the standing of your business and sends the right message to visitors and passers-by alike. This is about much more than vanity. Both office location and appearance can make a huge difference to the calibre of staff and clients that you can attract.

The fact is, your office is just as much a part of your brand as your logo or marketing material. Suppliers, clients and customers will make certain assumptions about you and your business based solely on the premises you inhabit – so first impressions count.

About the author: Neil Petch, Chairman at Virtugroup
About the author: Neil Petch, Chairman at Virtugroup

With a history of business successes, Neil Petch is well known in the UAE and beyond as a visionary entrepreneur with a passion for helping others establish and grow their own businesses. Neil founded Virtuzone in 2009 and quickly established it as the region’s leading company formation expert, before launching Virtugroup, a holding company that has a wider mandate of supporting startups from establishment; to successful market entry; and all the way through to exit.