Virtual Office could be the Answer for the High Office Rent Rates in Uganda

It is only natural that as a country rapidly develops, there is increased demand for office space as has been witnessed by the construction boom both within and around the city.

However, a closer scrutiny reveals that the rate of office space take up is not as good as the development and construction boom suggests. This is mainly as a result of the high rent and other costs like power, water that are involved.

Some buildings that the East African Business Week visited showed that the ground floor and the first floors were the most sought after while occupancy on the subsequent floors is almost non existent.

According to Mr. Moses Kayondo a broker with one of the firms in town, depending on the location of a building, the lower floors are easily accessible while the upper floors are often hidden and not easy for clients to reach.

"It is very easy for even a window shopper to just walk into any office on the ground or first floors which is not the case with the higher floors.

"The lower floors are however more expensive but most businessmen feel it is worth the sacrifice and that's why they scramble for them," Kayondo says.

As a result of mainly the high rent prices, many business owners have found it increasingly difficult to get affordable office space in the city. The owners of the buildings are also finding it increasingly difficult to woo potential clients because of the high maintenance costs they incur which are then transferred onto the tenants. As a result, the tenants are on the look out for any options.

Mr. Vincent Agaba, the Chief Executive Officer of the Association of Real Estate Agents (AREA - Uganda)an umbrella body for real estate agents in Uganda told the East African Business Week that most of the buildings have vacant occupancies at the top because there's over supply in the market which is not met by a matched demand.

"Over supply comes from the general appreciation of the industry (real estate) by the public. Our economy is however predominantly SME (Small and Medium Enterprises) which cannot afford to go to the A or B class buildings because of the price.

"For the public however, it (over supply) is good because it may push prices per square meter down, for the investor who put up the building, they are likely to have long spells of no occupancy if they insist on keeping the prices high," Agaba says.

Virtual office letting, a relatively new concept in Uganda has in recent months become very popular with a number of startup businesses.

This is where a brokerage firm rents off either a whole building or a number of floors on a building, partitions it into small office cubicles and then sublets it out.

Agaba says as a result many companies are resorting to virtual space letting so as to reduce costs while offering good services.

"We do not have many companies that can afford to rent more than 400 square meters, it is mainly huge companies that rent such space. It is more of an iternational concept where foreign nationals rent space for research and other activities.

"Locally, it will have to be appreciated by the SMEs especially those in the service sector because they can then meet their clients in a well organized office," Agaba says.

However, there is also the fear that this could yet again bring about 'Briefcase' offices because of the ease of acquiring an office address for a small fee as and when it is needed.

A few years back, many conmen swindled maoney from unsuspecting citizens just because it was easy for them to change address at any given time.

However, Agaba says that this can happen anywhere the regulator is not on the ground. He says that companies should display their registration certificates as well as trading licenses before they are granted an address if the vice is to be curbed.

"This is not entirely an issue of virtual office but also the regulator has to be on the ground. However the owner of the virtual office should have as much information from his tenants as possible so that in case of any follow up, they can easily be tracked," he says.

Mr. Zostine Kiongozi, a Managing Partner at Cadogan Asset Management Company says that virtual office subletting is a good concept to business owners who can not afford to pay a lot of money for prime office space.

"The concept of virtual offices enables even those with not so much money access to top rate services like internet, infocom, water, electricity and a very good address in an upscale location. As a result, the businessmen will reduce overhead costs and maximize profits.

"For as little as $18 per day one can have all these services at their disposal instead of paying millions for a whole floor which they may not even need," Kiongozi says.

Mr. Brian Tabaruka, the General Manager of Regus, a global space provider based in Uganda says that many people are realizing the benefits of virtual space letting.

"We've had clients embracing it because it is very convenient for startups and offshore companies seeking to set up here," he says.

This concept has become very popular especially for those who are coming into the country on short term projects that may not necessitate them to go for a whole office floor. This therefore enables them rent just the amount of space that they need and also get free services.

BY EMMA ONYANGO
East African Business Week
13-May-2012