In Hong Kong, an international city where every inch of land comes at a premium, finding suitable office space is both a challenge and an opportunity for businesses. After all, an ideal office location not only enhances a company’s image but also fosters a productive work environment for the team. However, for startups or businesses with very small teams (1-3 people), traditional office leasing may not be the most cost-effective option. As a result, many business owners turn to small office spaces.
So, what should you pay attention to when signing a lease for a small office?
① Understand the unique practices of the commercial leasing market
Signing an office lease is a legally binding business decision, and small businesses must carefully review every clause to protect their interests.
According to Capital Business Centre, Hong Kong’s commercial leasing market has its own unique customs. The standard lease term is typically two to three years—longer than the 1-2 years common in residential leases. Leases are usually divided into a “fixed term” (dead lease) and a “renewal term” (living lease). Unlike residential leases, during the renewal term, only the tenant has the right to decide whether to renew—the landlord cannot unilaterally terminate the lease. This clause is particularly important for small businesses, as it provides stability and prevents forced relocation during critical phases of operation.
② Pay attention to rent adjustment mechanisms for small offices
Regarding rent adjustments, long-term leases (e.g., six to nine years) often include provisions for rent reviews every three years based on market rates. Small businesses should pay close attention to such clauses and try to negotiate a cap on rent increases to avoid budget strain from sharp rises in the future.
Another valuable clause to negotiate is the right of first refusal—meaning the tenant has priority to renew the lease under the same terms when the original lease expires. This is especially important for businesses in a stable growth phase, as it prevents the loss of an ideal office space due to landlord changes or market fluctuations.
③ Be aware of usage restrictions
Some buildings may prohibit certain types of business activities or impose limits on visitor numbers, goods movement, etc. For example, industrial buildings used for government-approved creative industries (e.g., art studios, audio-visual production studios) do not require a land lease exemption. However, using such spaces for retail or direct public services may be illegal.
Similarly, even in traditional commercial buildings, businesses that generate noise, odors, or high foot traffic may face restrictions. These details should be clarified before signing the lease.
④ Easily overlooked insurance responsibilities
Standard leases often specify insurance requirements, and tenants may need to purchase comprehensive office insurance, including public liability and property coverage.
Notably, some older office buildings may lack sufficient fire insurance, or their coverage may only include common areas—not the interior structure of the leased unit. In such cases, tenants must purchase additional insurance. These extra costs should be factored into the budget to avoid unexpected cash flow disruptions.
⑤ Other legal considerations
From a legal procedural standpoint, business owners should note that all leases must be stamped (commonly known as “payment of stamp duty”) within 30 days of signing; otherwise, they cannot be used as evidence in legal disputes. Stamp duty is typically split equally between the landlord and tenant and is calculated based on the total rent over the lease term, with rates ranging from 0.25% to 1%.
Additionally, for mid- to large-sized office leases with complex terms, it’s advisable to seek legal advice rather than relying solely on standard contracts provided by real estate agents. Lawyers can help review hidden clauses, explain legal jargon, and ensure tenant rights are fully protected. The cost of legal consultation is a worthwhile investment to avoid potential future losses.