How to find the right commercial property

Perhaps you’ve just bought a franchise that relies on commercial space from the outset. Or maybe you’ve operated your franchise unit from home, but now you need office or warehouse space as the business has grown. Finding the perfect premises for your franchise business can be extremely stressful and involve costs you hadn’t anticipated or allowed for.

If you opt to rent or lease a commercial property, you’ll have to budget for monthly expenses such as service charges and utility bills. On the other hand, if you’re buying a commercial property, you will need to put down a large deposit and pay professional fees.

So, which option if best for you and your business? Here are our top tips franchisees should consider before buying or leasing commercial property.

1. Location, location, location

---

Just as you would spend hours researching the area surrounding your dream home, you should put the time in when it comes to finding the right location for your business. Whether you choose a busy town centre location or a more cost-effective rural area is largely dependent on the type of business you’re running. If your business relies on customers passing for trade, a central location is key. For businesses that do not have customers or clients visiting regularly, footfall isn’t a concern.

When you’re searching for your commercial premises, keep your business’ target market in mind. If you’re opening a convenience store selling magazines and snacks, you may find it advantageous to be near a train station, for example. If you own a restaurant that’s geared towards young, trendy consumers, you’ll want to set up in a city centre or near a university campus. On the other hand, if you own a window installation business, you can afford to rent a site in a quieter area with cheaper rates. In this case, you’ll specifically market your services to potential clients, rather than relying on serendipitous visits by passers-by.

Remember, your options may be restricted by the territory you’re allocated, particularly if it’s a small territory made up entirely of a suburban area or section of a city centre. Also, if you’re buying a retail or restaurant franchise, there may be strict guidelines regarding the floor space required. This will, of course, reduce your property shortlist and may push your investment up.

>> Read more:

• Buying a Franchise: Finding The Right Location For Your Franchise
• Everything You Need To Know About Commercial Property Leasing
• Why the location of your franchise is so vital to your success
• A Guide to Choosing the Perfect Location for Your Franchise

2. Legal matters

---

Often, franchisees find the perfect commercial property in a prime location, but find they need to make some alterations for it to meet the standards outlined in the franchise agreement. Small changes can be made to building interiors, but more significant work will probably need planning permission from the local council. It’s crucial that any work undertaken conforms to building regulations, as well as the franchisor’s specifications.

Making these changes can eat up a significant amount of your budget and take up time you could have spent differently. For this reason, if your franchise unit must meet certain specifications, it may be worth considering buying or renting a property that previously housed a similar business. It’s easier to amend an existing kitchen in a restaurant, for example, than build a new one from scratch.

3. To buy or not to buy?

---

Buying a commercial property is a huge commitment, and few businesses take it on unless they have large amounts of capital and are prepared to make a long-term investment. The main advantage of buying a commercial property is that it’s yours for as long as you want it and you can alter it to suit the needs of your business (subject to planning permission and building regulations).

Owning your business premises may not be plain sailing though. Firstly, deposits for commercial property mortgages usually sit at around 20 to 30 percent of the property value. This is a huge sum of money to find when you’re first starting your franchise business. Also, when you no longer need the property, you may find it difficult to sell it. If you do find a buyer, you may have to accept a much lower price than what you paid. Of course, you can always consider leasing the premises, but this may not be an option if you need to release capital tied up in the property.

It is for these reasons that it is more common for franchisees to rent commercial property. Lease terms can last anywhere from three to 25 years, so you still get the security that property ownership offers. When considering a commercial property, it’s important that you understand the implications if you later decide that you don’t want or need to rent the property for the full term of the lease. In some cases, you may still be liable to pay the rent for the remainder of the lease term.

Also, landlords will generally allow you to make some changes to the property but, at the end of the lease, you may be expected to return the property to its original state. But, despite this, leasing a commercial property may still be a more practical solution for new franchisees than buying a commercial property.

4. Facilities

---

As well as the specifications of the building itself, you should be considering what the space offers you, and how the surrounding area will suit your staff and customers.

For example, it may seem trivial, but the convenience of having customer and staff parking near to the premises may have a big impact on your profitability. Having car spaces available for staff and customers to use can be extremely beneficial, particularly if your business unit is situated outside of a city centre.

It should not only increase the number of people who visit your premises and buy your products or services, but also make your business more appealing to potential employees. This means you’ll be able to attract and retain high-quality staff, as they’ll appreciate parking, especially if it’s free. For these reasons, parking has the power to transform your business.

If your chosen location has a car park, you should also research local congestion charges, as these may put potential customers off. You may come to the conclusion that there’s not much point shelling out a bigger investment for a premises with a car park if many of your customers would prefer not to drive there.

You’ll also need loading space for delivery vans or lorries. This is a crucial point, as your business won’t get very far without its vital supplies, so don’t overlook it. It’s likely that, if your chosen site has been used as a business premises before, it will have a loading bay, but it’s worth checking before you invest.

You should also consider transport links, as not all your customers will have a car – unless you’re starting an automotive services business! How far away is the nearest bus stop, train station or airport and would your workforce be able to access your business by foot if they needed to?

Also, take a moment to consider the local amenities. Are there nearby shops and cafes where your employees could get lunch, or is the site in the middle of nowhere? A rural location isn’t necessarily a negative point; outdoor space can be extremely beneficial for mental wellbeing, and could positively influence prospective employees’ decisions to work for you.

Finally, be sure to find out whether the area you hope to move into has good phone and broadband coverage. Even if you don’t think it’s necessary or relevant for your business, it may, in fact, be an essential. For example, your point of sale (POS) card reader will probably rely on WiFi to process payments.

5. Do your homework

---

What does the future look like in the area where you’re thinking of buying or renting commercial property? Are there any building or infrastructure changes planned that may reduce the appeal of your property? These are questions you should find out the answers to before you commit to renting a commercial property. They’re even more vital if you’re considering buying it, as a drop in the value of the premises could severely reduce your business capital.

The importance of understanding the costs that come with buying or leasing business premises should not be underestimated. Make sure you budget well, considering the costs that are part and parcel of running your business from commercial property. These include fees for professional advisers, surveyors and solicitors, business rates, insurance, maintenance and general repairs, running costs or service charges, Stamp Duty Land Tax (SDLT) and your mortgage deposit if you’re purchasing.

There is also a lot of jargon that goes along with commercial property occupancy. You should, therefore, take the time to learn the keywords used by mortgage advisors and other property professionals in order to ensure you are well informed. In short, time spent on research is never time wasted.

Summary

Choosing a commercial property for your business is as risky as buying your family home. But if you research thoroughly and make decisions with your head, rather than your heart, buying or leasing a commercial property for your business should be a sound investment.