Comparing the Total Cost of Two Factory Rental Options

Define a comparable operating scenario

Start with the same production volume, staffing pattern, working hours and logistics requirements. Decide which costs belong in the comparison and state any exclusions. Otherwise, a lower estimate may simply reflect fewer items being counted.

Obtain written quotations and the proposed lease terms for each property. Separate verified amounts from estimates and unresolved costs. State whether taxes are included in each quotation and ask your adviser to confirm the applicable treatment rather than assuming a universal rate.

For utilities, use the relevant provider’s current tariff and the proposed usage profile when building a real model. For transport, check the quotation’s scope before adding tolls or waiting charges separately. PLUS provides an official toll calculator and vehicle classifications for its network, which can support a relevant route estimate. PLUS journey and toll tools

References: PLUS journey and toll tools

Separate recurring costs, one-off costs and tied-up cash

List rent, agreed service charges, utilities, routine maintenance, insurance and location-dependent transport costs as appropriate. Include an item only once, especially when a contractor’s quotation already bundles several services.

Keep fit-out, moving, professional fees and planned reinstatement in a separate section. Allocate them across the comparison period for a management view, while recognising that the actual cash may leave the business much earlier or later.

Show refundable deposits separately. They affect the cash needed to enter the premises, but are not automatically an expense. Recovery depends on the agreed terms and what happens during the tenancy. Your accountant should determine the correct accounting treatment.

Work through a hypothetical comparison

Assume a 24-month comparison period, constant recurring costs and no rent increases. Assume all included amounts are on the same tax basis, with no additional tax adjustment in this illustration.

Option A has hypothetical monthly rent of RM18,000, other recurring occupancy costs of RM7,000, and one-off occupancy costs of RM72,000. Its recurring total is RM25,000 a month. Across 24 months, that is RM600,000. Adding RM72,000 gives RM672,000, equivalent to RM28,000 a month for comparison purposes.

Option B has hypothetical monthly rent of RM20,000, other recurring occupancy costs of RM5,500, and one-off occupancy costs of RM36,000. Its recurring total is RM25,500 a month. Across 24 months, that is RM612,000. Adding RM36,000 gives RM648,000, equivalent to RM27,000 a month.

Although Option B’s rent is RM2,000 higher each month, its modelled total is RM24,000 lower across the assumed period. The difference comes from the assumptions, not from a general rule that more expensive factories cost less overall.

Test what could reverse the result

In this example, an additional RM1,000 a month of recurring costs at Option B would add RM24,000 over 24 months and remove its modelled advantage, with everything else unchanged. That provides a useful question: how uncertain are the costs supporting the apparent saving?

Test plausible changes using evidence from suppliers and your operating team. Consider a delayed move, additional works, different transport requirements or an earlier exit. Do not invent probabilities merely to make the spreadsheet look sophisticated.

The illustration excludes refundable deposits, financing costs, opportunity cost, discounting and unpriced business disruption. Add these separately when relevant to your decision, and avoid counting estimated disruption twice.

Make the final choice conditional on suitability

A cost comparison cannot make an unsuitable property workable. Check operational feasibility and unresolved approvals before treating the cheaper model as the preferred option.

Keep a dated assumption sheet beside the calculation and obtain professional advice on contractual and accounting matters. The strongest comparison is one another decision-maker can reproduce, challenge and update when a quotation changes.