Commercial property is understood to account for 13 per cent of the value of all UK buildings. It includes everything from high street shops, restaurants, pubs, hotels, gyms and large out-of-town shopping areas to offices, factories, industrial units, warehouses, and even car parks.
The importance of the contribution premises can make to the success of a business cannot be overstated.
Here, Elena Nicolaou, a solicitor in our commercial property team, suggests what you might consider when determining a move to new commercial premises.
Do not over-extend yourself
Care should be taken not to over-extend as interest rates continue to climb in an attempt to battle inflation. Although historically still relatively low, factor in further potential rises as we head into 2023.
When premises have been chosen, commission a full professional survey before committing. It may increase your costs and delay your purchase in the short-term, but in the long-term will give you certainty as to what your purchase will cost in the months and years following completion.
Where you buy is important: How much space will you need? Is the accessibility afforded by town centres important for your client or customer base, or are you able to sacrifice accessibility for a potentially more cost-effective, out of town location?
Are any business rates affordable?
Is it the right choice?
If the business is a new enterprise, is buying the right option or would a short-term let be more appropriate?
For more established businesses, taking on a mortgage and owning the property may represent less of a risk and allow your business to share in any growth in property values.
Does the property have scope for expansion as the business grows?
Larger deposits for commercial property
Don’t forget that, as with a residential property, you will need to put down a large deposit, with mortgage lenders likely to ask for a deposit of more than 20 per cent of the value of the property.
Making money from the investment
Once inside, businesses can encounter cash flow challenges and sub-letting could be a way of raising extra funding and covering the mortgage and other costs.
Check with your lender before proceeding with your product to see if it is permitted.
Factor in those running costs
Running costs for businesses, particularly energy costs, are rocketing. Budgeting is key as neglected routine maintenance of premises can mount quickly.
Set funds aside for this and budget for potentially costly surprises.
How accessible is it for staff?
City or town centre locations are usually served by regular bus or train services, but providing parking is a real perk for staff who prefer or have no other choice but to drive.
For those with a bigger operation, an out-of-town site with more space could offer better parking facilities as public transport may be less frequent.
For help and advice on all aspects of commercial property including negotiating a new lease, please get in touch with us.