When you are looking for a building to run your business from, there is an important decision to make around whether you should buy or rent your premises. There are several factors to consider and making the right decision can be challenging.
Every business is unique, and every business owner’s circumstances are different, so there is no ‘one size fits all’ answer when it comes to deciding on buying or renting. We take a look at the pros and cons of each option to give you an idea of what you need to consider.
Buying a Commercial Property
As with any property purchase, buying a commercial property could be seen as an investment. Investments in bricks and mortar are very desirable in the UK – they are seen as safer options and an investment that can grow steadily over time.
You are your own landlord in a sense – meaning that the property is yours to adapt and occupy as you please. You will not need to worry about being tied into a restrictive contract or have any looming concerns over the landlord changing the terms, increasing your rent or giving you a notice to vacate.
Business owners can forward plan their finances as payments are usually on a fixed term mortgage. Some commercial mortgages can be fixed for up to ten years. Knowing exactly what your commitments are for months and years in advance can be useful for planning and provide peace of mind. Large rent increases and service charges from commercial landlords can sadly impact SME businesses, seeing them cease to trade.
Buying a commercial property does come with risks, as does any property investment. There is a chance that property values will drop in the future, and it is sensible to seek specialist advice before buying. You will also require a large deposit, usually 20-30% of the purchase price which may be out of reach for smaller businesses.
Owning a commercial building means that you have the flexibility to sell and move on as and when your business grows, downsizes or circumstances change. You can even sub-let all or part of the building if required.
Renting a Commercial Property
The process of renting commercial premises is much more straightforward and quicker than purchasing. Once contracts have been signed, businesses can move in and out of commercial buildings pretty quickly, allowing them to focus on the day-to-day running of the business. There is less need for invasive credit checks, less paperwork to complete and no need to put down a large deposit.
You may find more options available to rent than in the sales market, even though renting will never offer a return on your investment, it can provide you with the ideal space to run your business from.
One of the main disadvantages to renting is that you will subject to the conditions of your landlord. This is where it is important to have a commercial property solicitor take a look over the heads of terms before agreeing to take on a property lease to ensure that the terms are fair and reasonable with some room for flexibility.
It is important to understand what areas of the building’s upkeep, repairs and maintenance fall to you as the tenant or to your landlord, as this could be a large cost and responsibility.
Consider Your Business Needs
It is important to think about your business plans for the short-term and long-term future before investing in a commercial property or taking on the commitment of a long-term lease.
What are your plans for growth? How much space will you require? What is the market like? How are other businesses in your sector performing? What is the current state of your cashflow? What are your recruitment plans?
Choosing whether to buy or rent will also largely depend on your access to a mortgage or funds for a deposit. Business owners should seek specialist advice from a commercial property expert who can explain the options and help them to make an informed decision.
Commercial Property Assistance
Most business owners are best spending their time running their businesses, rather than stressing about property matters and it is rare for a business owner to have a complete knowledge of how to handle commercial property transactions.
If you are looking to instruct a solicitor to oversee the sale, purchase or lease agreement of a commercial property, then please get in touch to speak to our specialist team.
Call us on 01256 844888, email enquiries@lambbrooks.com or speak to our online chat assistant via the website, who can take your information and arrange a call back at a convenient time for you.
Other articles you may be interested in reading:
Tips for Negotiating a Good Deal on Your Commercial Property
The Cost of Renting a Commercial Property
Top 5 Tips for a Successful Business Relocation
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.
