Starting a business is exciting, and having the perfect place to work is just as important as the idea itself. In the Philippines, finding an appropriate incubator or co-working space is a key step for startups. This article shares essential leasing tips tailored for Filipino startups to effectively navigate the commercial real estate market.
Exploring the Philippine Commercial Leasing Scene
The commercial leasing market in the Philippines can be quite intense, especially in buzzing areas like Metro Manila, Cebu, and Davao. A few of the hottest spots include Makati, Bonifacio Global City (BGC), and Ortigas, where demand is high. However, don’t fret about your budget—there are options available for every size of business. Emerging locations like Quezon City, Alabang, and even provincial areas often have more competitive rates and can provide unique opportunities.
Many options exist, from well-known co-working spaces such as Acceler8, Clock In, and WeWork, which specifically attract tech startups, to conventional office spaces offered by major real estate developers like Ayala Land, SM Prime, and Robinsons Land. An interesting trend is the growing number of flexible workspaces provided by smaller, independent operators that cater to specific startup needs. This variety means you are not limited to bigger names.
Choosing the Best Incubator or Co-working Space
Selecting the right workspace is a vital initial step:
Define Your Needs: Start by understanding how many people you need to accommodate. Consider your technological needs like reliable internet and server access. Think about the kind of company image you want to present. Do you require private offices, shared workspaces, or meeting rooms? Clarifying these requirements helps you narrow down your options.
Conduct Research: Use online platforms such as Lamudi, MyProperty, and ZipMatch to start your search. However, don’t solely depend on these listings. Talk to other entrepreneurs and attend industry seminars to discover spaces that might not be widely announced. You might also think about hiring a trustworthy real estate broker well-versed in commercial leasing.
Visit Various Locations: Explore multiple sites before making a decision. Look at how the rent compares, the facilities they offer, the location, and the overall atmosphere. Pay attention to factors like noise levels, lighting, and the general vibe.
Assess The Location: A crucial part of your decision should be whether your office is easily reachable for your team and clients. Check if it’s nearer to public transit, eateries, and various amenities. Ensure that the area reflects your startup’s brand and targets your market effectively. For instance, Poblacion in Makati may be great for a tech startup looking for nightlife, while Ortigas offers convenience via public transport.
Important Lease Terms to Focus on in the Philippines
When you find a suitable space, it’s time to get into the nitty-gritty of the lease agreement. Here’s what you should keep an eye on:
Rental Rate: Find out how the rental rate works. In the Philippines, it is usually offered per square meter per month. When negotiating, factor in current market trends, the property condition, and the lease time. Compare these rates with similar spaces nearby.
Lease Duration: Commercial leases in the Philippines typically last between 1-3 years. Longer leases may allow you to negotiate lower rates, but it’s wise to consider your startup’s growth plans. A shorter lease could be beneficial if you think you might need additional space soon.
Security Deposit: Usually, the security deposit equals around 2-3 months’ rent. It’s necessary to clarify how this deposit will be used and what conditions apply for its return at the lease’s end.
Advance Rent: Landlords often ask for advance rent, translating to 1-2 months’ rent. You should try to negotiate terms regarding when this should be paid.
Escalation Clause: This section defines how the rental price will go up over time, commonly anywhere from 3% to 5% a year in the Philippines. Work towards a lower escalation rate or discuss having a fixed rent throughout your lease period. Be cautious of clauses involving currency changes as well.
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Operating Expenses: Make sure you know which operating expenses will fall under your purview, including common area maintenance (CAM), utilities, and property taxes. Clear information on how these costs are figured out and distributed is critical.
Fit-Out Period: Understand how long you have to make renovations and customize your space before rent starts accumulating. Negotiate for a fit-out period that aligns with your design plans.
Renewal Option: If you think you’ll want to continue with the space, ask for a renewal option that ensures your ability to extend the lease at a previously agreed rental rate.
Use Clause: This defines how you can use the space, so it’s essential to make sure it fits with your startup’s operations. If you plan on holding client meetings or events, ensure those are included in the agreement.
Termination Clause: Familiarize yourself with how either you or the landlord can end the lease. Watch for clauses that might disproportionately favor the landlord.
Parking: If your team requires parking, confirm the availability and costs associated with parking zones.
Performing Due Diligence and Legal Considerations
Before you sign anything, ensure you’ve performed thorough due diligence:
Verify Ownership: Make sure the landlord is indeed the rightful owner of the property. You can request to see the Transfer Certificate of Title (TCT) from the Registry of Deeds.
Check Zoning Rules: Make sure your business operations fit within local zoning regulations. You should connect with the local government unit (LGU) for verification. For instance, Pasig City enforces strict rules for business types in specific areas.
Carefully Review the Lease: Before you sign the lease, it’s advisable to get a lawyer to check it out. They can help ensure the terms protect your interests and clarify any confusing sections.
Local Government Permits: Validate that you are in line with all government regulations and have the necessary business permits.
Simple Tips for Filipino Startups
Here are further insights to help you strike the best deal:
Start Early: Begin your search ahead of your intended moving day. The more time you have, the better options you can explore, and the more negotiating power you will have.
Be Open to Negotiation: Don’t feel compelled to accept the first offer that comes your way. Work to negotiate the rent, lease terms, and other essentials.
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Highlight Your Startup Status: Emphasize your startup’s growth potential and the positive influence you can contribute to the locale. Some landlords may offer incentives to attract dynamic new businesses.
Build Relationships: Network with real estate agents and other professionals in the market. They might offer valuable insights and direct you to hidden opportunities.
Explore Government Grants: Various startup incentives are available from the Philippine government, such as tax cuts and financial support. Investigate what programs are out there and see if you are eligible. The Board of Investments (BOI) offers specific perks for startups included in their Investment Priorities Plan.
Consider Shared Workspaces: For early-stage startups, incubators and co-working spaces can offer a cost-effective solution that comes with helpful amenities and a collaborative vibe.
Get Legal Help: Always consult a lawyer before signing any legal papers, including leases.
FAQ
What is the usual security deposit for a commercial lease in the Philippines?
The typical security deposit equals about 2-3 months’ rent.
What is an escalation clause, and how can I handle it?
An escalation clause is a provision showing how the rental price will increase over time. You can ask for a lower increase rate or consider a fixed rent throughout your lease.
Should I hire a lawyer to look over the lease?
Absolutely, consulting with a lawyer is hotly recommended to make sure the lease safeguards your interests.
What kinds of government incentives can startups in the Philippines access?
The Philippine government has a variety of incentives available to startups, including tax breaks and support programs. Look into offerings from the Board of Investments (BOI) or the Department of Trade and Industry (DTI).
What are the perks of working in co-working spaces for startups?
Co-working spaces provide economic benefits, shared resources, and an engaging environment.
References
- Philippine Real Estate Guide
- Doing Business in the Philippines – PWC
- Lamudi Philippines Real Estate Market Report
- Department of Trade and Industry (DTI) Startup Programs
- Board of Investments (BOI) Investment Priorities Plan
