25th January 2015
For many start ups, the need for a commercial premise which compliments the activity of the planned business in Abu Dhabi, is often the key stumbling block to getting the new business off the ground. Both onshore and free zone licenses require companies to have a commercial premise of some description. The premise must be suitable for the activity – so if the company plans to sell goods, then a shop or warehouse would be mandatory; or, if the company was consulting, then an office space would be needed. Startups often consider the premise an unnecessary expense when the business could be started from the kitchen table or spare room at home and can also struggle with cash flow because in Abu Dhabi it’s customary to sign a 12 month lease for premises and this is all paid up front.
Working from home really is a ‘no go’ and there is no way to avoid the commercial premise as this will be inspected by Abu Dhabi’s Department of Economic Development (DED) during the incorporation process and also Civil Defense and possibly by other government departments, depending upon the activity. Equally, in a free zone, the relevant free zone authority will insist on leasing suitable space during the free zone setup.
What premise options are available onshore?
Dedicated commercial space
For most companies this is likely to be the only route. It will require speaking to Real Estate Agents to find out what suitable space is available within the budget. Its worth remembering, that signboards will be required and the interior will need to be fitted out appropriately for the nature of your activity, so if the activity requires an office space, then desks and chairs should be set up as a minimum. Ask around – cheaper options can be sourced, e.g. A small office suitable for up to four visas can currently be sourced in Abu Dhabi's Tourist Club area for around the AED25,000/p.a. mark. However, if the cheapest option is not what the deciding factor, prices vary across the city depending upon location, condition of the building and the size of the space, e.g. office space in Abu Dhabi's premium central business district is currently leasing at AED2,500/sqm + service charge. Its important to understand if there are additional service charges and what those rates are. Real Estate Agents fees are usually 5%. Real Estate agents will also be more likely to know what industrial space or commercial space is available too, or have good enough connections to know about spaces about to hit the market or to source something particular.
This might be a more flexible option for the start up company in terms of staggered payments across the year. Also, the business centres will provide refreshments, meeting rooms, IT support services and also call answering and mail collection services – these options may cost a little more, but could also save the startup time and hassle to focus on the core area of developing the new business. There are a selection of local and international service providers across Abu Dhabi and new business centres seem to be popping up all the time. Its currently possible to arrange an office for up to three persons for AED5,000/mth plus add ons.
4 Additional points to note about leasing space in Abu Dhabi
When leasing onshore in Abu Dhabi, a Tawtheeq lease is essential – this means that the lease is registered with the Abu Dhabi Municipality (ADM).
Except in exceptional circumstances, where there will be a variety of approvals in place and accompanying paperwork, it is not possible to sub-lease.
Always check the specific requirements for the premises in relation to the activity intended for the Trade License – certain activities may have additional requirements, such as requiring the space to be on the ground floor, or for the whole floor to be leased.
The size of premise should be suitable for the activities to be carried out and of sufficient size to comfortably accommodate the number of employees intended.
What are the premise options for a free zone?
Depending upon the activity, the relevant free zone will be able to offer dedicated space, from hot desks and offices to warehouses and land. Speak to the relevant free zone authority for current availability and pricing. It is currently possible to lease an Executive Desk in an Abu Dhabi free zone for AED15,000 per annum + add ons. This price varies considerably with another Abu Dhabi free zone offering a flexi desk option for AED30,000 per annum. For industrial space requirements, the free zones are likely to have modern warehouses, but the downside is likely to be that the minimum space is several hundred square metres.
Written by Jenny Hunt, Founding Partner & CEO
Gateway Group Of Companies, Abu Dhabi & Dubai, UAE
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