Colliers offers survival kit for global village

Real Estate Weekly, June 21, 1995

To help businesses better chart these unknown waters, Colliers International has created the 1995 "Survey of International Real Estate Practices," a survival kit developed by the 180 Colliers offices which details the practices and perils of commerce in 31 countries. Among other tips, the survival guide notes that:

* Businesses leasing space in Bombay must pay key money ranging from two years rent up to 50 percent of the capital value of the property, plus the full rent for the initial lease term, in advance.

* Up until February 1995, there was no such thing as an office lease in Argentina.

* Free rent for up to one year in six can be negotiated in New Zealand.

* "Status" space in Korea is on the lower floors, which rent for a premium because of the risk of unreliable elevator service; higher floors rent for less - the opposite of most countries.

* Landlords in the Czech Republic offer adequate telephone service and parking as tenant inducements to lease space (four-year waits for phone installation are the average).

* At least three different office space measurement methods are used in Hong Kong.

* Once a leader in upfront key money, lease terms in Japan are softening with the market, dropping to as little as one year's rent deposit, down from 30 months.

* In Russia, up to two year's rent in advance is often demanded. In Moscow and St. Petersburg, there is great demand for furnished space from 500 to 2,000 square feet, and an extremely limited supply.

* Typical lease terms in Ireland run from 15 to 25 years.

"Leases negotiated in foreign languages, enormous rent deposits which are unsecured, inadequate phone and fax lines, space shortages and locations where leasing space is itself a foreign concept, are among the many hurdles that business people must conquer in order to conduct business in different global markets," says Stewart Forbes, president of Colliers International.

"From Argentina to Japan, from Russia to New Zealand, we have created an easy-to-read guide explaining the rules, customs and regulations governing business practices, as they relate to establishing a place of business in 31 countries worldwide," says Forbes.

Many of the upfront rent and key money requirements abroad make the demands of building owners in the U.S., Europe and Canada look quite tame, where a much more affordable two to three months deposit is typical.

Australian landlords don't even require an upfront payment for new space, although guarantees from directors, partners or parent companies are common in the case of leases by private companies or professional firms.

While monthly rent payments are common in most countries, there are some notable exceptions. Quarterly payments are used in the Czech Republic, France, Ireland, Italy and United Kingdom. Indonesia demands quarterly or yearly advance payments, while in Turkey rent on commercial leases is paid in intervals of either three, six or twelve months ahead.

While rent is quoted in local currency in most worldwide markets, Russia, Mexico, Indonesia, Turkey and China often favor the dollar, especially for foreign tenants.

The very definition of rent and what services are included also differs greatly between the countries surveyed by Colliers. In France, for example, tenants don't pay rent but "loyer," which doesn't include operating costs, maintenance, insurance and tax charges.

Worldwide, tenants should expect to pay for their own utilities, service charges, parking, insurance and often property taxes, in addition to rent.

Landlords in Mexico offer a fairly comprehensive package, with "total" rents there including maintenance, security and air conditioning (during working hours), realty and value added taxes and parking. By contrast, in the U.S. the most comprehensive services are offered under "gross" leasing arrangements, while "net" leasing arrangements usually require tenants to pay for electricity, a/c and taxes. Triple net renters are generally responsible for all building operating expenses.

For a copy of 1995 Colliers Survey of International Real Estate Practices, contact Caitlin Mackesy Davies at (617) 722-0221.