1. Home
  2. /
  3. Business Blog
  4. /
  5. 2015
  6. /
  7. Risks of a Long-term Office Lease in Thailand

Risks of a Long-term Office Lease in Thailand

December 11, 2015 | Sharon Cheong

Have you ever stopped to think about what kind of lease arrangement would work best for your business? In Thailand, it is possible to obtain 100 percent interest for a land lease. The lessor (letter) gets the right to exclusive possession of the premises for the entire period of the lease. If you are a business in Thailand with fluctuating finances, here are some of the reasons why you should not go for long-term lease:

Complex negotiations

For a business, it is almost impossible to predict the scenario after 10 or 15 years. Long-term leases can be complex and negotiating a contract that will meet all your future requirements can be a challenge.

Increased costs of maintenance and repair

If the property is not properly maintained, often it is seen that the money spent on the repair and maintenance is close to the overall cost of the lease.

Increased risk

Getting into a long-term lease agreement means you will be liable to pay the rent for a longer period. This can often become an unnecessary financial burden for a company.

Long term lease can get expensive

The economy of Thailand is in good shape. When economic conditions are good, the cost of real estate is usually higher than usual. If you lock in the price at this time, you will keep on paying higher even when the real estate market goes down.

Long term lease is not good for startups

If you are a startup, which is highly likely in a country like Thailand, it is not recommended to invest the majority of your capital in a long-term lease contract. Evaluate your business plan and make realistic decisions based on the fortunes you are likely to amass in the coming years.

No flexibility

If the office space you have leased is found to be acceptable, but not ideal for some reason, then you will have to stay in the same premises for the entire lease term due to the hefty lease amount you have spent. With the changing business scenario of Thailand and new business opportunities coming up every day, it makes sense for an organization not to restrict itself with a long-term lease agreement.

The options of lease termination and contraction give you the flexibility you need to stay profitable in the turbulent scenario. If you have already decided to get into a long-term lease agreement, make sure that you have the right to sublease your space, which gives you an opportunity to cover some of your expenses via a subtenant.

What if your business fails?

Companies often go through the initial growth phase, but that doesn't mean that the growth will be the same in future. Long term sustainability is an issue with many startups. In fact, eight out of ten businesses in Thailand fail within eighteen months of opening. With a long-term lease, you remain responsible for unpaid rent even after your business is closed. Short-term leasing makes it easier for companies to move on quickly if things do not work out.

Of course, there is also a middle ground between the long-term and short-term office leases. A popular choice, especially here in Thailand, is the use of serviced offices offered by companies like Servcorp. Founded in the year 1988, Servcorp is committed to provide world's best serviced offices at rates that are affordable for most businesses. For technology-driven office solutions that work best for your business, call them now at +66 2 231 8100