Investing in the purchase of a commercial premises for your business is a big commitment. You will upfront capital or arranged funds through a lender, be confident in the location of property and the size you need from day one. With this in mind, many businesses choose to rent commercial space rather than commit to buying.
Here we consider some of the pros and cons of commercial renting.
The benefits of commercial renting include:
- Financial freedom – renting ties up less capital than buying, freeing up your money to spend in other areas of business development. In addition, you won’t lose money is there is a sudden drop in the property’s value.
- Flexibility – you will be free to relocate at the end of your lease if your business changes size or focus in the future.
- Protection from interest rates – although your landlord may increase your rent when it’s reviewed, you won’t have a mortgage that’s affected by interest rates.
- Less maintenance – by renting your commercial property, you may find that much of the responsibility for maintenance and repairs falls to your landlord. Be sure to check your lease terms carefully upon signing to understand where the responsibility lies.
- Your terms – although there has to be give and take, renting gives you an opportunity to negotiate the terms of your lease to bring them as closely into alignment with your business needs as possible.
Some downsides of renting a commercial property include:
- Market conditions – you won’t benefit if property prices rocket.
- Rent reviews – Your landlord will have the right to review and raise your rent at agreed intervals, and you will probably need to budget for a service charge.
- Neighbouring businesses – If you opt for a multiple occupancy property that houses several businesses, you won’t have any control over who you get for a business neighbour. In most cases that won’t be a problem but you never know…
In conclusion, both renting and buying have their pros and cons but what is clear is that securing the right premises for your business require a lot of planning and an in depth understanding of your business’ needs, both now and in the next five years.
- Investing in the purchase of a commercial premises for your business is a big commitment
- Securing the right premises requires a lot of planning and an in depth understanding of your business’ needs
Need help or advice?
If you do need a little bit of help, multi-disciplined surveying firms are valuable partners to have. They will often be able to assist you every step of the way from providing pre-purchase building surveys and valuations for secured lending purposes, conduct lease renewals and rent reviews when you are in occupancy, and when you come to sell the property or move on to new rented accommodation, their commercial agency team will be able to assist. Use our contact form to get in touch.
Want to hear more?
If you found this article helpful and would like to receive more posts like this directly to your inbox, subscribe to receive our quarterly newsletter or follow us on twitter @KemptonCarr and like us on facebook to see them first.