Over the past years, business enterprises have been continuously growing in Tokyo. Accompanying this growth are greater demands for attractive, professional, and economic office spaces. Business owners are looking into offices that can cater all their basic business requirements. In Tokyo, short term office spaces such as serviced offices are being preferred more compared to other office rental options mainly because they have flexible lease terms, a prestigious business address, better management options for those with limited resources, and of course lower start-up costs.
There are many considerations you need to look into when establishing a business in Tokyo especially when it comes to renting an office space. Although it might be better for some people to rent for the long term, perhaps you do not need that much space or you are on a budget. Either way, this guide will show you how to rent in the short term in Japan’s biggest city, Tokyo.
Understanding Serviced Offices
As a pointer, an average office space in Tokyo can cost 10,000 plus yen a month for one square meter.This range makes it one of the world’s most expensive places to rent an office at, but still cheaper than cities such as Hong Kong or Singapore. The great thing is that there is an option called “serviced offices” that are more economical considering the many advantages you can get out of it.
Serviced offices or serviced business centers are fully-equipped, professional, and ready-to-use office spaces that you can rent immediately at flexible terms. Usually, these office spaces can house around 1-10 staff and some cheaper options are shoebox like (i.e. one-man booths). They offer managed business services such as access to their amenities like IT infrastructure, utility room, meeting/conference room, reception, and more. Additional services can be accounted on a per-use-basis or depending on the provider’s pre-set contract. The rental fees for these office spaces typically include security, utilities, office furniture, and the base rent. These make serviced offices a top choice for start-up businesses.
The Advantages of Renting a Serviced Office
There are many reasons why different companies such as consultancy firms, start-ups, representative offices, and project-based teams under industries like construction, IT, insurance, and others prefer renting serviced offices.
- Availability for immediate use without spending a cent on key expenditure like furniture, IT and telecommunications infrastructure, interior design, office equipment, and renovation and maintenance fees.
- Readily available and on-demand business support such as secretarial and administrative services, conferencing facilities, shared lounge, reception services, unlimited water and coffee, and others.
- Flexible rent options and shorter commitments.
- Cost-efficiency because you only pay extra costs for additional services when you need them.
- An impressive business address right at the heart of Tokyo in well-known wards such as Chiyoda, Roppongi, and Shinjuku
Disadvantages of Renting Serviced Offices
While there are definitely lots of advantages, renting serviced offices also has its own disadvantages.
- Not being able to choose the interior and exterior style or décor, which can be an essential aspect of branding.
- Meeting and conference rooms may not always be available when you need them to be since you are sharing with other tenants
- Renting out a service office may send the message that your business is small and not stable.
- In the long run, the convenience of renting serviced office may actually be more expensive than renting a bare office
The cost of renting serviced offices in Tokyo may appear initially high. However, you have to take note that the fees usually cover other hidden costs that you may have to incur in a traditional office. The cost also differs depending on the location and size of the serviced office that you chose as well as the amenities and added services that you availed. Make sure to check with your lessor for discount offers if you intend to lease for a year or more.
Now, prior to finalizing your decision, it is crucial to evaluate the services that you would like include in your contract. Typically, most serviced offices offer the following (which may or may not be included in the rental fee):
- As-needed administrative assistant
- Photocopying and printing services
- Messaging, telephone, and fax machine usage
- Office cleaning and maintenance services
- Office furniture
- Computer(s), LSD projectors(s), and other hardware
- Meeting and conference rooms
- Internet connection
- A/C unit(s) including cleaning and repair
- Pantry usage
Common Lease Terminologies In Japan
Whether you will personally inquire about the various office rentals in Japan or you will hire somebody to do it, it is essential that you understand the common lease terminologies that you may encounter.
Fixed Amortization Fee (Shoukyakuhi)
This is a non-refundable payment that you issue to the lessor upon vacating the office space. The amount is usually deducted from your security deposit and can range from 0-2 times your monthly rent.
Security Deposit (Shikikin, Hoshokin)
This is a refundable deposit paid to the lessor, which is initially included in the total fees you initially pay. You will be able to get it 3 weeks after vacating the office space after necessary costs like fixed amortization fee (if applicable), general cleaning fee, and restoration fee have been deducted. For small to medium-sized offices, this can be 4-8 times the monthly rent. For larger offices, this can be as high as 6-8 times the monthly rent.
This is the fee you pay for using the office space and is usually expressed in “tsubo” (a unique measurement basis used in Japan, which is equivalent to 3.3 square meters). To imagine it clearer, 1 tsubo is twice as large as the size of a traditional tatami mat.
Don’t forget to check with your lessor if the management fee is included in your rent.
Sales Tax (Shouhizei)
Lessees in Japan are required to pay sales tax, which is currently 8% of the rent, fixed amortization fees, management fees, and renewal fees and key money.
Free Rent Term
This is an incentive offered to you by the lessor. For example, you only pay 11 months’ rental for a 12-month lease contract or you get one month free (13thmonth) for signing a 12-month lease contract. However, this often only covers the office space rent and you still pay for the corresponding management fees.
Types of Office Renting/Leasing Agreement
There are 3 common types of office renting and leasing agreements in Japan.
The first one is called Membership Sign-up which is a short-term office rentals (that lasts anywhere from 1 month to 2 years). You typically need to sign up for membership so you can have access to the space. This is a good lease for start-ups and other smaller companies.
The second type of office renting/leasing agreement is a Non-Renewable Fixed Rental Agreement. A lot of medium and large-sized offices that are operated by major companies use this kind of rent/lease contract. The contract indicates the specific date when the rent/lease agreement expires. It is usually non-renewable unless both parties agree to.
The last type of office renting/leasing agreement is a normal rental agreement. They usually have a term of 2 years. Upon renewal, a renewal fee may or may not be charged.
There are many service providers in Japan that can help you find an office space for short-term lease. In the end, it all depends on your proposed budget and specific requirements.
Renting a serviced office can be the most convenient solution for you in the time being. However, make sure to weigh the pros and cons so you come up with an informed decision. On top of it, understanding the Lease Agreement is vital. Know the terms and conditions well and ask questions if you need clarifications before you sign the document as this is irreversible.
With serviced offices, you can quickly start your new company without dealing with the typical price points and hassle of traditional offices. If you do choose the traditional route, that can work for you as well as long as you are willing to put in the work.
Office sort-term rentals FAQ
How much time will a serviced office save me
Of course that question depends how experienced you are on setting up an office and how good your Japanese is, but a minimum of a few weeks up to a few months.
If you pick a furnished place, you will not have to spend extra time buying office appliances.
Also, since renting serviced offices is seen as more temporary, the amount of paperwork is also less.
I have a staff of 20 plus people. Can I still get a serviced office?
Just ask the site! It can be hard in that situation since serviced offices are meant for smaller office spaces.
Do Japanese offices have cubicles?
Traditional Japanese offices do not. There usually will be a big desk where all the computers are laid out and you sit side by side by coworkers. Although it is not impossible to find cubicles, it is much harder, especially if you want a serviced office, where space is limited.
What are other ways that Japanese offices are different than western ones?
In Japan, it is not uncommon to see workers take off their shoes and switch into slippers when they head into the office. In the morning, they say good morning and annouce they have arrived to work. In the evening, coworkers also announce when they leave. As a foreign company, you do not have to abide by these unspoken rules, but it can be nice to implement them, and at the very least, be knowledgable about these rules.
Would it be smarter to rent in a small city that is not Tokyo?
Smaller cities in Japan are less English friendly. In Tokyo, more staff are able to speak English and there are more English services. This can be an advantage if you cannot speak Japanese. In addition, smaller cities do not have the same quality of public transportation. If you were to go to Osaka or Kyoto instead, these problems might not affect you as much.
In addition, most companies like to set up in Tokyo since there are so much opportunities available for foreigners.
I am not sure if my company will be able to break-even within 2 or 3 years but I want a traditional office space?
This is not recommended as traditional office spaces bounded by contract have longer leases, and breaking lease never looks good on your rental history.