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Location can mean success or failure
Nicholas Olczak
update on Saturday, January 16, 2010
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Anybody wanting to set up a new business in Hong Kong will have to find answers to questions, including whether there is demand for the planned product or service, who the main competitors are and whether the company will be able to hire the type of employees required.

It is easy for the issue of where your office will be to get lost. But this can be the most important decision of all - sometimes determining whether your new business succeeds or fails. Arranging office space can be a bewildering process, with a wide range of options and traps to catch unwary participants. As businesses look for a location, they have to decide whether to commit more up front and buy a space, or to rent and leave themselves vulnerable to fluctuations in rental price.

Iain Chapman, director of commercial and head of tenant representation group at real estate consultancy Colliers International in Hong Kong, says that companies deciding where to locate their offices need to consider budget, access to a suitable workforce, and proximity to clients. "If you're a law firm and you put offices in Tsim Sha Tsui when all the lawyers are in Central, why would they come to work for you? Real estate makes up 3 to 4 per cent of a company's costs, while human capital is 60 per cent. You need to be able to hire and maintain staff," Chapman says.

It is important for businesses to seek advice on the different options, he adds. Those that deal directly with developers may risk paying over the market price for their property.

Chapman says companies wishing to rent space should get legal advice on the terms of their lease. This way they can negotiate terms which to some extent safeguard them from future fluctuations in rent.

"Rental prices are always adjusted," he says. "But you should try to get a cap, so that you are not unrealistically exposed to the market."

Chapman says companies with specific needs may want to be located in buildings designed for their industry. Buildings such as the International Finance Centre have been designed with investment banks in mind. These have a large open floor plate that allows an integrated office environment, back-up power generators and information technology facilities. For telecommunications buildings there are hi-tech data centres such as Telecom House in Wan Chai.

When Epsilon Telecommunications set up business in Hong Kong, they looked for an office that combined technology and services, and chose to locate in Wan Chai's AXA Centre. "Because we only required space for three to four people, a serviced office space was the natural choice for our start-up," says Andreas Hipp, the company's chief executive. "For us, the main drivers were central location where customers are in close proximity, the office can be easily reached by clients and visitors and obviously cost."

The well-being of staff is another consideration. Features such as light and airy spaces can increase staff motivation and help reduce sickness or stress. Offices close to green space provide opportunities for staff to relax during the day. Some companies want to locate in specialised buildings with restaurants and spas to cater for employees. Others may choose an office in buildings close to main modes of transportation, which reduces the time employees spend working.



Checklist

  • Budget
  • Access to the targeted workforce
  • Proximity to clients
  • Whether the building caters to the industry
  • Whether the place has light, airy and green space that increases staff motivation and reduces stress

 


 

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