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What to consider when choosing Commercial Premises.

Date Added 23.11.21

Acquiring new commercial premises for your business is exciting.  It can also feel daunting with so many factors to consider, such as how the move may affect your employees and clients and the future development of your company. Tollers are here to assist you in your big move and have collated a list of points to consider when viewing prospective premises.

Location

You will want to find a balance between price and location and think logically about the use of the premises.

Ideally, your commercial premises should be conveniently situated for employees, clients and suppliers with good transport links.

Whilst your premises should be accessible, visibility may not be a priority for your business. For example, if the premises are to be used for storage or if you travel to clients or assist them remotely, there may be other, more cost-effective options for your business.

It would also be sensible to review long-term development plans for areas to assess whether they may help or hinder property values in that location in the future. An increase in value of your premises would increase your business capital.

Liquidity / Cash Flow

It is important not to overspend on commercial premises, in case your business requires a cash injection at a later date.

If you are buying premises, mortgage lenders tend to ask for a deposit of 20% of the value of the property.

If you are renting premises, less capital is invested, but in addition to the rent, insurance rent and service charge, the Landlord may also require payment of a rent deposit upfront.

Stamp Duty Land Tax may also be due on the value of either the purchase price or the annual rent over the term of a lease.

When budgeting, also consider the cost of fitting out and furnishing your new premises, as well as long-term upkeep and ongoing costs. The Seller or Landlord (transaction dependent) should be able to provide you with an estimate of costs such as business rates, service charge and insurance rent.

Leasing or buying

Generally, we would advise that new businesses or start-ups opt for short-term leases and you may even want to negotiate a tenant’s right to break the lease before the term end date.

A short-term lease offers flexibility to restructure your arrangement or to relocate as your business evolves.

A longer-term lease could provide you with more security, but you would want to ensure that there are flexible options for subletting the property or assigning it to another company. Depending on the premises, it may also be worth checking whether there are any restrictions to changes in the use of the premises.

An established business may consider it to be more cost-effective to buy premises within the area where they are recognised, instead of leasing. Buying a property gives you more control over its management and maintenance and gives you complete freedom to adapt the property to suit your needs and compliment your brand. Commercial Property Funding and Finance | Tollers Solicitors

You could even lease part of the property to a third party, which would provide you with an additional stream of revenue and day-to-day running costs would be shared.

You would hopefully also make a profit on selling the property in the future.

Flexibility

Your business will evolve over time, but it is impossible to predict the future. When choosing your premises, you will want to think ahead. Whilst you may need more space in the future, you do not want to pay for lots of space that you do not need now.

If the premises are too big for your business right now, it may be worth taking the lease and subletting part of the property, which would provide you with a source of income and also help cover service costs. If you are considering this option, it would be sensible to inform the landlord from the offset to ensure that subletting of part of the property is permitted.

It would also be sensible to consider how you would fit out the premises, because furniture, stock and equipment all take up valuable space. Health and safety regulations require you to ensure employees have enough space at work, so you should consider those requirements and regulations.

Whether you are looking to buy or let commercial premises, it is important to ensure that you consider all of the options when making your decision, in order that it works for your business now and in the long term.

Tollers Commercial Property team is on hand to guide you through the process and help negotiate a deal to achieve the best outcome for you and your business.

To find out more…Talk to Tollers on 01604 258558 and a member of the team will be happy to assist you.

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