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Step Two: The Hunt for Office Space

My office space hunting expedition. You laugh while I cry... sort of.

Cross posted from my bloghttp://vijay.axham.com/blog/426/step-two-the-hunt-for-office-space

Seattle and Chennai are two completely different worlds, and I'm not just talking about the weather. Leave aside the differences on the surface, there are a myriad of ways in which doing business in the two places is very different, both legally and culturally. I've learned this the hard way over these last three months. And I can confidently state that I've merely scratched the surface in my education. I'd spent about 9 months over the course of two trips to Chennai between September, 2010 and March, 2012, acclimating to both the weather and culture, as I explored the feasibility of setting up a studio in Chennai. But I was in for some new lessons in June, 2012 as I began the formal hunt for office space. 

Some terminology

There are various terms bandied about when talking about real estate in India. I'll stick to the ones I encountered that are relevant to office space.

The first two, related to facilities available within the space, are cold (or bare) shell and warm shell.

Cold shell means the space is essentially bare bones i.e. you have a floor, walls and a ceiling. Typically, the floor is bare concrete (no tiles or vinyl or carpet), the walls are not painted, electrical facilities will be a line from the local electricity board which is terminated in a single trip switch; plumbing seems to be a variant with some places having toilets built out and others not.

warm shell on the other hand, has finished flooring, painted walls, some power outlets and some lighting, functional toilets, a pantry. It may also include air conditioning (as I experienced in one case). Often the space is split up for use as offices, conference rooms, etc. Warm shells are not furnished, but some landlords offered furnishing as an add on. Most warm shells I encountered were spaces that were previously occupied that the former tenants decided to leave as is, probably due to demolition cost.

Three common terms when it comes to the square footage are carpet area, plinth, and super-built up.

Carpet area refers to the usable space enclosed within the proverbial four walls.

Plinth area refers to the carpet area plus the are occupied by the proverbial four walls. e.g. if the interior dimensions of the office are 9ft x 9ft, the carpet are would be 81 sqft. If each of the walls is 6 inches thick, then the plinth is 10ft x 10ft i.e. 100 sqft.

Super built-up area is composed of the plinth as well as the areas shared with other occupants of the building. Examples of shared areas are corridors, staircases, utility rooms, recreational areas, etc. Parking is not included in super built-up.

When folks refer to the size of a space for rent or sale, what they are talking about is the super built-up area. Depending on the facilities available and design of the building, your actual usable space i.e. carpet area will be 60% to 70% of the super built-up area. Rental rate is usually quoted as Rs.X per sqft of super built-up area. So, the effective rate you pay for usable space is 50%-70% higher, depending on the building.

Our requirements

I had calculated that we needed space in the ballpark of 1000 sqft. I had determined that for various reasons of security, privacy, etc, sharing office space with another company wasn't going to work for us. An apartment converted into an office was also off the table - there's a perception of being poorly funded if a company is operating out of a converted apartment; at least this is the distinct impression I got from folks I spoke with. The whole "work out of a garage" type culture doesn't quite seem to have caught on in these parts.

So, an office in a commercial building was what it had to be.

In terms of localities, I was looking for office space within a 5 mile radius of the apartment, This would keep my commute to a half hour at the upper end. And yes, it does take me half and hour to cover the 5 miles to my office; a bit longer on the way back. So, I was restricted to south and central Chennai areas which, with Adyar at the center, covered areas up to Perungudi in the south, Guindy on the west side, T. Nagar on the north-west side and Nungambakkam on the north.

Choose your difficulty: Easy, Medium or Hard

There are there options, just like in games, when it comes to finding office space:

  1. Easy: Go to a handful of companies like Regus or to the Software Technology Park of India ( STPI ) and rent out pre-built furnished office space for the number of seats, paying for other facilities like meeting rooms, etc. They give you 24x7 electricity, running a generator during the 1-2 hour daily and once a month all-day power outages that are the norm in Chennai. The offices are very clean, air conditioned and well maintained.  This is a good option for a number of situations such as varying team size, urgency in getting some office space set up, or if you're unable / unwilling to make the capital outlay to find and build out an office. It is also additionally good for the case when you want to begin operations quickly while working on finding and building out your own office space. The downside is that it's relatively expensive. At the time of my inquiries, rates ran from Rs. 10k to Rs.15k ( approx. USD 200 to USD 300 ) monthly per seat.
  2. Medium: Hire one or more agents to find a space according to your specifications. The upside to this is that you can work simultaneously with multiple agents who compete for the customary 1 month rent as their fee. Virtually all properties on the more popular websites, like Sulekha are listed by agents. I also found that a number of listings on other sites like Magic Bricks, while marked as "by owner" are actually agent listings - you'll only find this out if you ask explicitly. Coming to the downside, biggest issue was that all the agents I spoke with collected commission from both the landlord as well as the tenant; which to me is a huge conflict of interest. This single factor was enough to put me off using an agent, if not entirely, at least until I was satisfied that I had explored other avenues.
  3. Hard: Scour local newspapers and websites like Magic Bricks, which have a mix of owner and agent listings; talk to folks, figure out the actual location, fix up an appointment and visit the place. More often than not, finding the location was a bit of a challenge. Google maps was my constant companion and with 3G service on my iPad, I was able to navigate the city. I found that folks preferred to use landmarks, rather than road names, to give directions. There were several occasions on which I received directions like this: "From the main road, take a left at the third signal ( traffic light ) that comes after the blue tea stall on the opposite side of the road." Very different from the kind of directions that Google maps or any GPS navigation device would give you.

I'm hardcore foolhardy - so I choose Hard

I went with option #3 because option #1 seemed like a waste of money and option #2 would have meant dealing with some rather unsavory people. Just to be clear, I did talk to about two dozen agents and found only two I might have been willing to work with.

Week 1: I wasted my first week trying to find office space in technology parks, until someone kindly pointed out that tech parks were for organizations that needed substantially more space than I did; think minimum of 3000 sqft and in some cases 5000 sqft. Apparently, one tech park Ascendas in south Chennai does accommodate smaller companies, but all their small spaces were taken. The only available space was 13,500 sqft.

Week 2: I struggled a bit during the second week, partly because I didn't know that my questions had to be very specific and even the slightest hint of vagueness in answers should be interpreted negatively. This was the week I would learn of the inherent chicanery in the way commercial real estate rental business is conducted. One particularly disconcerting attitude I encountered repeatedly was that folks believed they could "convince" you to rent the property once you saw it. I say convince in quotes, coz it's more along the lines of conning you.

No-nos: Two important things I learned during this week were that rental rates are higher for tech companies, and people misconstrue a game studio as being part of the film industry, thus very quickly refusing to rent their space out to you. I had encountered higher rates in the early part of the week, and a couple of times, I used the term game studio to describe the company. Bad idea! I was very politely shown the door despite my protestations and attempts to explain the terminology.

A third lesson is to have business cards printed, even if your business doesn't have a physical address - this lends some legitimacy to your claim of being a business entity. As an aside, unlike in America, business cards are handed out even in non-business situations. I had a number of relatives, friends and neighbors expect me to hand them a business card when I told them that I was starting a game studio.

Week 3: I was in my element. I had figured out what questions to ask and how to interpret the answers I got. This meant that I could very quickly eliminate a whole lot of listings and zero in on the ones that were suitable for us. By this time, I had also learned to describe the company as a game design company, rather than a game studio or a tech company, the latter being slightly difficult since the Indian business entity was named Axham Technologies.

With the exception of five places, all other places I visited ( 50 or so, in total ) were dumps; to describe them as dirty and unkempt might be considered charitable in a number of cases. Armed with the shortlist, I went back to my guide in all Axham administrative matters - my father - who also serves as the CEO & COO of Axham Technologies. It took him a day to visit the shortlisted offices and after a bit more spelunking on his part, we were down to two. One in Mylapore, which was newly constructed, 1600 sqft ( 1200 sqft usable ) on the 2nd floor, with no elevator; the other in Nungambakkam in an older, less attractive building, 1100 sqft ( 750 sqft usable ) on the 1st floor, with 2 elevators.

We decided to sign up for the space in Nungambakkam, since that's considered the central business district of Chennai. The smaller usable area is a bit of a negative, but other considerations such total lower rent, easier connectivity with more public transportation options, and being an area surrounded by other corporate offices rather than residences and retailers, tipped the scales. We signed a 3 year lease in the first week of July.

What I would do differently, knowing what I know now

I would setup in STPI for the first year, saving 2 months of time that I've spent so far on building out the office. This would have allowed me to start my hiring process sooner rather than later. It would also have allowed me to jump start the main business of the studio - game development. Once folks had been hired and work on the game was underway, I would use the last 3 months of the first year (part time) to find less expensive office accommodations and build it out while game development work was in progress.

Next up

Building out the office. More appropriately described as "I don't want to stop banging my head, coz it feels so good; definitely way better than dealing with contractors."

Edit: Fixed formatting, typos & grammatical errors. 

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