If you are looking to lease or buy commercial property, there are certain factors you need to consider before choosing one. Whether purchasing a unit for a restaurant, bar, warehouse or shop, we look at some of the main factors involved with selecting the perfect commercial property for your business needs.

The area

One of the most important things that you need to consider is the location. For example, if your business is a restaurant or clothes shop, you will want to make sure that the premises is easily accessible for customers.

Location will also be crucial when it comes to hiring employees. You may find it difficult to recruit good team members if the place does not have good transport links, or the salary offered does not make the transport costs worth their time. Specifically, if you have technical requirements, you may struggle to source such personnel in small towns or rural areas.

The location of your premises will be even more important if you are a start-up, as it may be much more likely that you are hiring young people/graduates who are just starting their foray into the world of work, and so therefore may rely more heavily on public transport to get to their place of employment, rather than having their own vehicle in order to get to a less accessible area. It’s small, but essential things like this, that must be taken into consideration.

Having positive cash flow

If you are a new business, you should carefully consider how much you spend on renting or buying the facility. A start-up or new business should watch their cash flow carefully and avoid any risks of overspending on the premises in case business does not take off.

This can even be the case for fully-established businesses too. It may be worth being slightly strategic when it comes to how you choose a place to rent – for example, you may choose a prime location but decide to rent premises that are just off the main road to keep rent costs lower.

Lease or buy

Of course when it comes to choosing commercial property, it is essential you thoroughly consider whether to lease or to buy the premises. Generally speaking, it is recommended that newer businesses opt for leases on a short-term basis (around a year-long) this means that it is easy to restructure your lease at a later date than if it was longer term.

For larger, more established businesses, it could work out better to buy, especially if you plan to stay in the area for a lengthy amount of time, it may be more cost effective.

Key advantages of leasing a property

• Equity – As the owner of the property, you will have various options to draw upon the equity as collateral, for example if you wanted to self-finance a new project or new equipment.
• Rental income – If you have spare space then you could accept tenants
• Tax – Depending on how you purchase the property, there are different capital tax reliefs available, such as capital allowances or sometimes including rental income as well. Be sure to investigate the options before you buy.
• Capital growth – Over the longer-term, you would expect the property to increase in value over time. There are likely to be Capital Gains Tax issues to consider though.

Key advantages of buying a property

• Flexibility – If your business grows, or circumstances change, you can relocate. Be sure to arrange a break clause in the lease contract before you sign for this reason. Sub-letting some of your space may also be an option – again be sure to check this in the contract.
• Maintenance costs – Other than services charges and the requirement for general upkeep of your office or work area, most other building costs are not your responsibility. Similarly, your insurance is likely to be less extensive.
• Tax – Lease payments can be deducted from your income.

Regulatory and building requirements

The last thing you want is to find a great commercial property that seems to have everything going for it, putting a deposit down, and then discovering that the building does not abide to a whole host of building regulations, which may take a considerable amount of time to sort out.

Conducting a thorough survey for the property beforehand is essential before any renovations take place or the premises is open to staff or customers. This includes any potentially harmful substances or building errors that could put stakeholders at risk.

Return on investment

If you plan to sell the business and the property one day, will it indeed hold its value? Could you make a good return on investment if you sold in five, ten, or 20 years’ time? There are some areas that are undergoing regeneration such as Shoreditch, Tottenham and Wembley, which could turn into a good investment if you decided to resell your property or rent it out in the future.

Gareth Morgan, managing director of Liberty Marketing, discusses how completely refurbishing an office in a 1980s block allowed the company to put its own stamp on its surroundings.

We are a digital marketing agency that specialises in SEO, PPC and content marketing.

In our previous office, we had great facilities, but the cost was too high. When I was considering where to set up, I looked at somewhere that I knew could host good internet, as this is something we, as a digital marketing agency, cannot function without.

I ensured that there were great transport routes nearby as half of the staff come from the other side of Cardiff. We have a train station just a ten minute walk away, and a bus stop just outside the office. There are also great parking facilities too for both staff and clients. These were big things to consider when choosing an office.

“What is so great about the current property is that we were able to overtake the above floor as we expanded the company”

I wanted somewhere that I could put Liberty’s stamp on, which is why I chose an old building from the 1980s that would need completely renovating. The office was completely refurbished, and we definitely added our own stamps to make it fun and vibrant – people enjoy coming to work here and every one, including clients, love the vibe and individuality that the office offers.

Our old building had no space, so it wasn’t easy to expand the company. What is so great about the current property is that we were able to overtake the above floor as we expanded the company.

Again, the location really helps with staff morale. There are plenty of pubs around for a pub lunch or an after-work drink. Staff used to go for a pub lunch every Wednesday, and it took them over a year to try out all the different local ones. There are also two gyms within walking distance for those that enjoy a lunchtime spin class and also two supermarkets nearby as well as a Starbucks.

Absolute Commercial Interiors creates and designs places to work for clients. Here, managing director Phil Brown discusses how he navigated his own office move.

We work with the hospitality, leisure, and commercial sectors to transform the interior spaces of companies and iconic brands such as Leeds United. My previous trade as a joiner armed me with practical knowledge, but my team of design and space planners help to conceptualise and transform the region’s unloved and bland offices.

Since we started out at our Harrogate home, The Old School House, our headcount grew rapidly by around 20. Combined with a number of client wins, I was faced with the difficult question, ‘Should I stay or should I go?’. The answer to this all depends on whether you’re maximising the design and layout of your old space.

While it’s entirely possible to reduce many of the spiralling costs associated with moving premises by redesigning your current office, we felt the time was right for us to seek out a more spacious setting for the team. Our new office space, in the leafy Harrogate suburb of Hornbeam Park, now gives us free reign to fully customise the space to fit our needs.

“An evaluation of your current space and a clever redesign can accommodate more staff than you had anticipated”

Our old offices were split across two floors of the same building, but our new open plan layout now facilitates more flexibility and collaboration when the team are working on projects.

The move out of the town centre has also meant that access to the offices are far easier for both clients and staff when it comes to avoiding traffic and parking problems. The creation of our portfolio room means that we’re now able to hold boutique consultations with clients and prospects, allowing us to build mood boards to help with the creative process.

Dilapidations (returning the premises to its original state) can often come as a shock and spiral in expense, sometimes costing up to £9.54 per square foot! With this in mind, an evaluation of your current space and a clever redesign can accommodate more staff than you had anticipated.

However, like us, it might be the case that you’re ahead of your growth ambitions, meaning you will indeed need a brand new space! These days, contracts for offices can often mean businesses are fixed to their premises for up to ten years, so my main recommendation would be to make sure the decision is at the forefront of your mind before it’s too late.

Further Resources

Tax implications of buying commercial property as an investment [pdf] – A guide from Alexander & Co Chartered Accountants

Commercial property insurance – A good overview from The Association of British Insurers

Five things to consider when converting a property for commercial use – Advice on how stay on the right side of the law and make sure your property is safe and secure