Whether you are expanding your existing portfolio or a new business looking for its first commercial space, taking the time to carefully consider your requirements for a commercial property is vital. When searching for a property best suited to you, it can be easy to become overwhelmed, particularly as you do not want to hinder your business’ situation in terms of your clients and future development opportunities.
In this article, the commercial property team at Langley Wellington considers some of the points you should consider when searching for the best commercial property for your business.
Finding a ‘happy medium’ can often be challenging between selecting a property within budget and in your ideal location. Often, businesses may find that they have to sacrifice one for the other.
You will want to find a property that is convenient for your employees, clients and suppliers. However, if, for example, you do not require premises that is easily accessible to members of the public, you may be able to save money by leasing a property in a more rural area.
Although one premises may be suitable for your business, you should always take a look at the wider area and community in case there are any developmental plans, either short or long-term, that may affect you.
Prioritise Cash Flow
Although it can be tempting to overspend when renting or buying your commercial property, it is not advisable to do so. Doing so may mean that, should your business require a ‘cash injection’ at a later date, you have less disposable finance available.
Mortgage lenders typically request deposits at 20% of the property’s value. If you are renting, less initial investment is required; however, in addition to the rent, insurance rent and service charge, the landlord may also require a rent deposit upfront.
In addition, Stamp Duty Land Tax may also be payable on either the purchase price or the annual rent.
In addition to the abovementioned considerations, you should also make provisions for any fittings, furnishings, machinery, long-term premises upkeep and ongoing costs.
Should I lease or buy?
In most cases, for small businesses, it is advisable to enter a short-term lease for flexibility if required. In addition, it might be suitable to negotiate a tenant’s right to break the lease before the term end date. Short-term leases bring extensive flexibility, giving the opportunity to restructure arrangements, relocate, upsize or downsize as necessary. Furthermore, a shorter term on a lease may bring the rental value below the Stamp Duty Land Tax (SDLT) threshold, meaning that there will be a saving for the business, benefitting overall cashflow.
On the other hand, for larger companies, long-term leases can provide security and opportunity. Companies with longer-term leases may decide to personalise their premises according to their business needs. Should they intend on doing so, it is essential to check whether there are any restrictions regarding this before entering into the lease.
For more well-established firms, it might be the most cost-effective to purchase their commercial premises. This provides better opportunities for personalising the property according to the business’s requirements, meaning freedom of adaptability. Although purchasing a commercial premises typically means that the company intends on inhabiting it for an extended period, it is also sensible to consider its future selling price, as it would be beneficial to make a profit on the original purchase price.
Commercial Property Solicitors UK
Deciding on commercial premises is an essential and overwhelming process. Extensive considerations must be made, including whether to lease, long or short-term, or to buy.
At Langley Wellington, our commercial property solicitors understand the overwhelming nature of selecting the best premises for your business. We can support you from start to finish throughout selecting, negotiating and obtaining your lease or sale.
This blog is not intended to be taken as advice or acted upon. If you are seeking legal advice, please get in touch with our team of solicitors.