The right property for your business

Read time: 8 mins  Added: 06/10/2023

If you're not running your business from home, then finding a property at the right price can prove a key factor in your success. This guide will take you through the process of finding a property that fits your business, from buying versus leasing to the legal essentials.

1. What sort of premises do you need?

Pulling together a list of all the facilities you’ll need at the property before you start looking will save time and money.

  • Does your property need to be easily accessible for customers and/or suppliers?
  • Will noise or pollution from your business be an issue?
  • If there are competitors close by will this help bring in customers or make things more difficult?

The facilities

  • How much parking do you need?
  • Do you need meeting rooms and reception areas? How about storage, for instance warehouse space?
  • If you’re looking at a business park, are some shared facilities available?

The amenities

  • Is there a good enough supply of gas, water, electricity and drainage?

2. How to look for premises

There are several different ways of looking for premises:

  • Estate/commercial property agents.
  • Property listings online.
  • Vacant properties and managed workshop units on local authority registers.
  • Industrial estates and business parks in your area.
  • Property consultants – they can help source potential properties for you.

Sign up with several of these to make sure you get a good supply of property information. They’ll send you details of properties that become available and may send out e-newsletters that can give you an idea of the market.

3. Buy or lease?

You’ll usually find commercial properties that you can either buy (freehold) or rent (leasehold). Here are some of the pros and cons of both options.

Freehold

Freehold pros and cons

The positives

The negatives

The positives

The building is yours to use as you see fit within the law.

The negatives

As a start-up business, it may not be easy to get a commercial mortgage - you could have to find a substantial deposit to secure one.

The positives

You have long-term stability whereas a landlord may decide to sell the property and request your exit on the lease renewal date.

The negatives

You’ll need to make enough profit to keep up your repayments, even if interest rates rise, so it can be a financial risk.

The positives

Adapting your premises to suit your business does not need permission from a landlord.

The negatives

Commercial properties for rent are more widely available than properties for sale so your choice may be limited.

The positives

You have the flexibility to expand in the future if your space allows.

The negatives

You are responsible for the up-keep of the property and these costs could easily escalate if you need significant repairs such as a new roof.

The positives

You can make use of any unused space by sub-letting.

The negatives

The positives

Your property is an asset which will rise in value in a positive market.

The negatives

Leasehold

Leasehold pros and cons

The positives

The negatives

The positives

May need minimal capital outlay at the start.

The negatives

There will be limitations on making alterations or to sub-letting any spare space.

The positives

A smaller financial risk than freehold.

The negatives

Negotiating your lease can be complicated.

The positives

A lease is commonly renewable so you can usually stay on (unless you breach your contract or the landlord wants to take back the building).

The negatives

There can be penalties and contingency charges as part of a lease that can use up your capital when you may need it most.

The positives

Often significant repairs on the property are the responsibility of the landlord.

The negatives

You may not have a choice on utility suppliers so you can’t negotiate the best rates for these costs.

The positives

With competition for rental properties you may be offered incentives such as rent free periods.

The negatives

You could be liable for repair costs on exiting the property.

The positives

If your chosen location doesn’t work out you have the option to move at the end of the lease.

The negatives

You don’t gain from the increasing value of the property in the long term.

4. Leasing a property

If you’re leasing a property, ask a solicitor to guide you through the small print of the contract. You should find out:

  • How long the lease is for and who owns it.
  • The terms of any break clause, allowing you or the landlord to terminate a tenancy before the end of the lease.
  • The name of the person responsible for repairs and renewals.
  • The frequency of rent reviews and possibilities for a rent cap.
  • How much the service charges will be.
  • If you’ll need to give a personal guarantee.
  • Whether you can reassign the lease if your business needs change
  • Any limiting or unfair terms.

Also speak to your solicitor or surveyor about suitable break clauses and the right to sub-let.

Costs

Commercial property is usually priced per square foot, so work out what room you’ll need and use that to set a budget figure.

You should check for other costs including security, cleaning, maintenance charges, local council business rates and insurance. These may all be included in a service charge.

The current tenant may be able to give you details about service charges and whether the landlord provides a good service. Service charges can have a significant impact on your business finances, so find out if there are plans to work on the building in the near future. Speak to your solicitor or surveyor about negotiating a cap on your service charge liability.

5. The structural survey

Once you’ve found a potential property, you’ll need to have a complete structural survey carried out on the building and any work required. The Royal Institution of Chartered Surveyors can provide a list of surveyors in your area.

Other things to check:

  • Does the property have planning permission?
  • What’s the property grading – is it possible to agree a change of use if needed? (If renovations are necessary, speak to the local town-planning officer about them).
  • Is there any history of subsidence or damp?
  • Has the area been prone to flooding in the past?
  • Does the building comply with health and safety and planning regulations? You, and your landlord if you have one, will be responsible for making sure the premises are fit for business.

6. Legal essentials

Health and safety

Your survey should assess whether the premises comply with health and safety and planning regulations.

If you fail to meet the regulations you could receive a substantial fine or have your business closed down. Regulations cover premises and working conditions – including machinery safety, noise and fire procedures – as well as special rules for your industry.

Ask your trade association or industry lobby group for advice, and visit the Health and Safety Executive for guidelines on specific working practices. You’ll find a full list of trade associations at the Trade Association Forum. You can also ask for advice on health and safety matters from a solicitor or your local fire safety officer.

If you employ people in an office or shop, you’ll need to register with your local council – normally the Environmental Health department. If you’re going to be manufacturing, you must register your factory with the Health and Safety Executive.

Disabled access

You can get advice on disabled access to your premises from the Equality and Human Rights Commission. They also offer advice and guidance on all aspects of human rights applicable to businesses – from the minimum wage to hours of work.

Insurance

The law requires that you take out some, or all of, the following insurances to safeguard your business:

  • Employer’s Liability Compulsory insurance – protects you against claims from employees for injury or disease resulting from their employment.
  • Insurance for your premises and equipment
  • Public Liability insurance – protects you against claims from members of the public for injury sustained on your premises or as a result of your or an employee’s activities.

Find out more about how our business insurance can help.

7. Useful contacts

Commercial mortgages

If you’re looking to buy property for your business, a commercial mortgage could help you finance it.

More on commercial mortgages

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