|
I thought it would be amusing, with one end of year past and another soon to arrive, to discuss a few of the idiosyncrasies of the Shanghai office rental market. Conflicts of interest, Net vs Gross floor space and finding adverts, all spring to mind.
There is a conflict of interest in the current market system, regarding the payment of agent fees. The majority of rental deals currently transacted, involve the landlord paying all or most, of the agent's fee, for introducing a new tenant. This might seem a pretty logical state of affairs, with the agent being paid and therefore acting on behalf of the landlord. But is this the case?
Ask any agent who their 'clients' are and they will, without a moments hesitation, tell you it's the prospective tenants. So, while the landlord pays the fees, the tenant is the client. Or, putting it another way, an agent usually acts on behalf of the party not paying their fees against the party who are paying them.
Of course, there is a clear benefit for this state of affairs. Namely, the prospective tenant can reduce their transaction costs, because they are normally paying a small, if any, proportion of the agent's fee. Looked at another way, it means the agent is conflicted, the tenant unrepresented and the landlord probably not getting the level of service, I would expect, were I the sole fee payer in the transaction.
Saving money is always an exciting prospect, but in this case caution and cost might be a preferable bet. Caution, particularly for those companies new to Shanghai and China, would be better secured by instructing an agent to directly represent them in a proposed transaction – for an agreed fee. (As would happen in Europe or the USA). And actually, the cost needn't be significantly higher, because, unless the landlord is using another agent (and therefore paying their fee), it should be possible for the agent representing the prospective tenant to negotiate a rent rebate in the form of the commission which would have been paid by the landlord.
I can't help have a little comment on the joys of Net vs Gross floor space. The philosophy of which interests (some) in its own right. Unlike Europe, where rents are calculated on the net internal area, over here, tenants pay for the gross usable area (to include public areas, passages, WCs etc). The philosophy behind this involves the logical premise of needing a certain amount of space to support an office unit; this seems fair as the landlord could hardly be expected to shoulder the cost of public areas. However, it can mean some pretty gross situations and even more inefficient buildings, with apparently 'low' rents actually being pretty racy on a usable sqm basis. So, keep your eyes open for this one; its worth doing a quick cross check analysis on actual rents expressed net per sqm/day.
Finally, a quick word about the current advertising of agency services in Shanghai. Many readers will have noted much of the English language 'commercial' property advertising, is still going into the lifestyle publications. Partly because the business segment of the English publication market, is considerably less mature. I would be interested to hear from any readers who can tell me where they have sought information for office services in the past. Or whether there are any of you who have found it difficult to find a suitable service. All comments or answers are most welcome.
A prosperous 2005 to you all and looking forward to the Chinese spring...
|
