Investing in commercial property is one of the most important decisions you will make for your business, so it’s crucial that your decision is an informed one. This post takes a look at your options for investment and considerations you’ll need to take into account before you go ahead.
Choosing the right location for commercial property
Making a decision on the location is half the battle when you’re investing in commercial property of any kind. It’s prudent to do a lot of research about the geographical areas that will be best for your business and weighing up the pros and cons of each against each other to come to a conclusion. Things to think about:
- How easy is it to find and access the Premises
- Demographics can be important especially for retailers
- Local area profile
- Transport links
- What type of commercial premises do you need?
Usually we find that parties who approach us already have a good idea as to what they are wanting.
But for many, finding suitable freeholds which match their criteria closely can be tricky to source. In general, retailers’ requirements are more sensitive and particular than other categories.
Many businesses opt for a mix of industrial and office accommodation, whereby offices are built in the form of a mezzanine within a modern portal framed lofty warehouse. This could also incorporate a trade counter for sales.
Using an experienced commercial property agent is essential to get the best options.
Should you buy or rent commercial premises?
The benefits of buying as a company – in the long term at least – tend to outweigh the benefits of renting commercial property. So if you have the capital to be able to buy commercial property through your business, it will be a good long-term investment especially if you buy it well with sound advice from your property agent.
Renting can be argued as money that could be better spent on investment. Owning outright means you will build up equity over time, and your business can effectively pay you, the new owner, the rental that you would have otherwise placed in another landlord’s pocket. If your business outgrows the premises, you won’t have a rental contract holding you back. Plus, you have the option of using the property as an asset; by leasing the space or selling, you can gain extra capital.
However, there are, of course, drawbacks to buying commercial property. The deposit you’ll need to secure the property will usually be around 20-30% of the value in advance (more if the Bank Valuer down-values the Property) and of course, it’ll be up to you to coordinate the maintenance and upkeep of the building. Depending on many factors, mortgage rates may fluctuate, and mortgage payments cannot be offset as a business expense whereas rental payments can. So, like renting there some disadvantages.
Future tax liabilities on rental received and capital gains can be avoided by placing the property in a self-invested pension fund but there will be costs associated with administering this which may offset these savings.
These are just a few pointers to get you started on making the most important decision for your business.
You can read more about the pros and cons of buying or renting commercial property in this blog post.