Renting office space in Japan can be a complicated and expensive task for a foreigner setting up in business. There are many things a new business owner must take into consideration before they decide on a suitable office, including location, size, services, cost, and of course, dealing with the language barrier. However, these days there is a lot of help out there to make the ordeal run a lot more smoothly.
Here, we have put together a guide outlining some general factors you should take into consideration when making your decision about your office space, along with standard rental agreement terms and expenses to expect when renting in Japan.
Types of Office in Japan
Furnished/Unfurnished office space
These offices are recommended for companies that wish to establish a long-term business base. A furnished office contains all the essentials you need to begin your operation, so you can save time and effort while you get to work on building your enterprise.
An unfurnished office gives you the freedom to design your own space to meet the specific needs of your business. However, the cost of redesigning the space and buying furniture will increase your renting budget significantly. If you are a start-up company, your focus might be more geared towards on the business aspect and not design.
The size of these offices vary and you can rent small sections within a building, or the entire building, depending on the size of your company.
These properties are recommended for companies that are looking for short-term rental or in the process of setting up in business. A serviced office provides all your furniture as well as access to water, internet, phone lines and printing and fax facilities. It costs more each month, but it takes away a lot of the headaches you might experience trying to organise all those things yourself.
Serviced offices range from small, furnished cubicle-style offices with shared meeting rooms and facilities to high-end office buildings with bilingual secretary services in central locations. These properties are generally only available for short-term contracts but they enable a new business owner to save on initial investment costs for interior layout construction and office infrastructure setup.
Shared office/Co-working space
A shared office allows you to rent a desk in an office with other workers or businesses working around you. There, you can have all the benefits you would enjoy if you had a full-time office, including your own phone line and handset. This is a great option for people who don’t need to host clients at their offices or want to keep their rent costs down. In Japanese culture, when two companies get together and meet up, typically, the smaller company goes to the bigger company. So unless you already have a presence in Japan before you started your company, you probably will not need to host clients for a while.
A virtual office provides businesses with a physical address and office-related services without the overhead of a long lease and administrative staff. With the increase in online business, this model is becoming an increasingly popular office option for digital entrepreneurs.
For the purposes of setting up a company in Japan, however, it is necessary to have a physical office in order to meet the Investor/Business Manager visa requirements. So, we will focus on the criteria for renting a physical office below.
Choosing a Location
Deciding the best place for your office is very important. There are many things to consider before making such a decision. Things you need to think about include:
- Cost of rent in specific areas. Obviously, it is important to take the cost of rent into consideration when deciding your office location. You don’t want to blow your annual budget on rent.
- Proximity to major stations and airports. If you plan to host foreign clients or business associates, you should take into account how easy it is to get to your office from main transport hubs like the major stations in the city you operate in or the nearby airports.
- Walking distance to the nearest station. Being close to a train/subway/bus station is very advantageous with any company office. Not only for visiting clients but for yourself and your employees to have a short, or easy, commute to work.
- Employees’ commuting time and fees. You should consider the distance and travel costs of your employees when deciding where to set up your office. Also keep in mind that for the Japanese, one hour commute time one way is perfectly normal.
- Traffic on the specific train line. Rush hour traffic can cause delays for you, your clients and your employees so you could think about renting near a transport line with less traffic.
- Proximity to banks, post offices, restaurants and so on. Being near to services is a major consideration when choosing an office location, for convenience and saving time. This can also be a big headache because the trains will also be more crowded.
These are some of the factors you should keep in consideration when choosing your location because they will have a big impact on how smoothly your business will operate on a daily basis.
Types of Lease Agreement
Normal rental agreement (Renewable)
The standard rental agreement normally involves a 2-year contract which renews automatically.
Fixed-term rental agreement (Not renewable)
With a fixed-term rental agreement, the contract ends on the expiry date of the agreement. However, the agreement can be re-contracted if both the landlord and the lessee agree to any new terms.
A membership sign-up system is employed for renting short-term serviced offices to allow all members to have access to the space. These offices can be rented from one month to a year.
As in any country, the rent for office space varies. In Tokyo, you can expect to pay upwards of 13,000 yen ($120) per square meter.
Factors to keep in mind when renting an office
- Distance from a train or subway station. The closer your building is to a train or subway station, the more expensive it will become, especially if that train or subway station is a desirable one with many connecting routes.
- Proximity to the city centre. If your building is in a dense, built-up, central area, you can expect to pay higher rent rates.
- Size of the building. A larger building can charge a significantly higher rent than a smaller one.
- Age of the building. The older the building, the cheaper the price will be. However, keep in mind they will more likely have issues in terms like electricity.
- Cost. Make sure that the expense to go to the office rent will not rock your business revenues. Ask yourself, will it bring the company’s money out of budget?
- Safety and security. Life first before anything else. Seriously ensure that the office you will be staying can give you comfort and is not life-threatening. Although, Tokyo as a whole is rated as one of the cities to live in.
- Convenience for employees. Remember that quality employees do not sacrifice their comfort for the sake of having a job. Seriously consider this when renting an office in Japan.
- Accessibility. Is the location convenient for your costumers’ top visit? If not, then you better look for another. Otherwise, you are just putting your investment into a total waste
Common Lease Agreement Terms
Having chosen the type of office you need, and its location, you must be aware of the terms of the lease contract you will have to sign. Below we have highlighted some general terms you will have to meet to secure a lease agreement for an office in Japan.
- A refundable security deposit of 4 to 12 months’ rent. However, it could be up to 20 months’ rent in more prestigious buildings.
- A non-refundable deposit of 1 to 3 months’ rent, which is commonly known as ‘key money’.
- The real-estate agent’s commission, which is normally equal to 1 month’s rent.
- Office lease agreement term of 2 years, although this depends on whether you opted for a shared office or an ordinary office space.
- The landlord usually requests that you have a personal guarantor, who is a resident in Japan, to guarantee the lease.
- Many landlords also demand that you pay lease guarantee insurance, which costs around 1 month’s rent.
- If the lessee does not end the lease, it will automatically extend every 2 years for a further 2 years, with a 1 month rent renewal fee payable at each extension (unless you have a fixed-term rental agreement).
- The lessee must return the office space to its original condition upon vacation using an approved contractor.
- The landlord can deduct any necessary cleaning and refurbishment costs from the non-refundable deposit.
While these are quite normal conditions for renting office space in Japan, there is nothing to stop you from trying to negotiate better terms for yourself before you commit to any rental agreement. After all, if you don’t ask for concessions, the answer is always no.
Renting an office space in Japan doesn’t have to be so difficult for a foreigner who is new to the country. You can hire various professionals to help you with any of the steps you have difficulty with. There are a number of companies who deal specifically with securing office rental space for foreign business owners. They can search for offices that meet your specific requirements, negotiate on your behalf with the landlord, help you with the required documentation and also provide you with a guarantor if you need one.
Renting Office Space FAQ
What type of office space should I rent to set up a company?
The type of office you rent depends greatly on your business set up. If you have a number or employees, you would need to rent a bigger space than you would if you were the only employee.
Whether or not you plan to invite clients to your office is another factor to think about when you choose an office to rent. If you do want to have entertain visitors, you’d need to have the space, and appropriate setting, to accommodate them.
Do I need to understand Japanese to go through the rental process?
While it would be good for your own benefit to know Japanese, it is not a requirement. These days there are many services that will provide support to business owners who want to rent office space. A quick internet search will provide you with numerous options to choose from.
What factors should I think about before I choose an office space?
Some factors you should think about before deciding on an office space include the following:
- Cost of rent in specific areas
- Proximity to major stations and airports
- Walking distance to the nearest station
- Employees’ commuting time and fees
- Traffic on the specific train line
- Proximity to banks, post offices, restaurants and so on
However, you should also think about your own company’s individual needs to make sure that those needs will be met at the location you choose.
How an office space is measured in Japan?
In Japan, it is common to measure the floor area with “tsubo”, a traditional measurement unit that equals to one tatami mat or about 3.3 square meters.
Can I access my office anytime?
That largely depends on the terms of the lease and the business hours of the building where you rent the office. Be sure to clarify of your office is accessible at night or during weekends and holidays, etc.