5 Factors to Consider Before Buying Your First Commercial Property

Whether you’re thinking of investing in commercial property in one year’s time or five, it’s always a good idea to plan ahead as it is a huge responsibility, and you can help to speed the process up. 

A commercial property doesn’t just have to be an office building – it can also be a warehouse, factory, restaurant, supermarket, hotel, and much more. There are a huge variety of ventures out there for budding entrepreneurs to take over and make their own.

Make sure you carry out extensive research and have secure plans in place. In this blog, we’ve rounded up five factors you should consider before buying your first commercial property.

1. Whether it’s a freehold or leasehold

You may have heard of these terms before, but not everyone really understands the difference between a freehold and a leasehold. They are the two main types of property interest in the UK. 

A freehold property means that you will own both the property and the business, or businesses, within it. This is a very popular option due to the complete ownership it gives you, as well as the comprehensive security knowing that there is little chance you could be moved on from the property due to increased rent or other reasons.

The property is likely to also increase in value over time, so you may even be able to rent out some of the property to another business for some extra income depending on the terms of your freehold. 

On the other hand, a leasehold is a more attractive prospect for some entrepreneurs due to the freedom that it allows. You’re not committed to paying back a mortgage, which can be a serious commitment for some businesses, especially if you want to scale and eventually move as you hire more employees. You also don’t have to worry about paying for repairs or insurance, as that is already covered by the building owner. 

2. The location

Location is absolutely key to the success of your business. There are various reasons this needs to be considered – for example, will your clients be coming in regularly for meetings? Is the location in a convenient area for them, or is it more out of the way? Is there free parking available for them, as well as your team?

A central location would of course be preferable due to ease of access and easy transport links, as well as access to employee talent both in the city and outside it. However, for many businesses, this sort of location is out of budget due to hefty prices. You may want to rent a property outside of the city center for now, and then plan on upgrading once more revenue is brought in.

3. Available facilities

Another important factor is available facilities. The building will need to be connected to power, water utilities, electricity, heating, WiFi, phone lines, and more. This is especially important to consider when buying a new build as not having these may cause some delays! 

WiFi is especially important, even more so if you are renting out office space where tenants are relying on it to carry out vital work. This can make or break someone’s experience in your property and could even cause them to move out if their work is seriously affected.

If specialist work is being undertaken, you may also need additional facilities such as toxic waste management, specialist recycling points, and ventilation systems, as well as an extensive health and safety and risk management policy.

You may also own the car park belonging to the property, which is a bonus for your employees and can actually attract talent as parking can be a big reason for choosing a job – especially as city center parking prices can be painfully high.

You may be lucky enough to have ownership of a central shared communal space within the building. This can be another source of passive income as you could rent the space out by the hour, which can attract freelancers. Even better if you have an on-site cafe where they can spend their money and contribute to business costs. This has become a very attractive business model over the past decade due to the entrepreneur/freelancer boom.

4. Your budget

Naturally, your budget is what is going to determine the sort of premise you can afford. Be realistic, you are not going to get a great city center location on a low budget! Keep this in mind at all times and try not to go over your own limit, as this can set you up for disaster if you run into further financial hiccups.

You will also need to place down a large deposit if going down the freehold route, just like you would when buying a house. Have you accounted for this? Some mortgage lenders may also ask to see a business plan in order to feel confident that you can keep on top of monthly payments, so have that to hand in anticipation – otherwise, you could be set back.

5. Accessibility 

Accessibility is extremely important to consider. Do you have ramps, accessible toilets, disabled parking spots, and working lifts available? Also, how close are the car park and the public transport stops?

You may also need to consider having security guards if the building is not entirely secure, or you have valuable goods inside. This extra cost should be worked into your budget for facilities management. If you are allowing staff to have keys, consider who has them and when they will be in the building, especially if you have a flexible working policy or work on shift patterns.

Keeping your workplace accessible can open the doors to more talent. It’s worth mentioning if the building is accessible on your Google My Business profile, as well as the website for the building and the businesses within it. Although you may not have any employees with additional needs, some clients and guests might, so it’s important to plan ahead for this and make sure everything is in place.

Written by Lara Harper