If you are seeking new commercial premises, should you buy or lease? Both have their pros and cons. Here we explore some of the main benefits and pitfalls of buying or leasing commercial premises and which circumstances may dictate which choices is the best for your business.
Costs and savings
- Upfront costs: To buy a commercial property you will need a sizeable deposit, as well as adequate funds available upfront to cater for renovation costs and other outgoings. So if cash flow is an issue within your business, buying a freehold may not be the best use of your available assets. Leasing commercial premises may be a better option for businesses that are just starting out or that do not have substantial savings.
- Overall value for money: In the long term, buying your premises could provide a better return on your investment. So if you are looking for stability and have the funds on hand to pay for all the associated costs, you may find that choosing freehold pays dividends in the long run, especially if commercial property prices are likely to rise in your area. If you find that the property is too large for your needs, as the landlord you would have the option of using part of the space while sub-letting the rest.
- Five year plan: Do you have significant plans for your business over the next few years? Will these affect where you are based? If you are looking to expand or hoping to relocate to another area, leasing commercial premises could be the best short-term choice to give you more flexibility for changes large or small.
- More control: If you feel you’ve found the perfect location for your company, being a landlord can help give you more control over your premises and leave your options open. For example, if you would like to extend the property or make other changes to the building, you will have the freedom and autonomy to go ahead with your plans without having to get consent from the owner. (Of course, you would still need to seek planning permission and comply with other relevant regulations).
- Responsibility for repairs: Owning your own business premises brings responsibility. If you commit to a freehold then you will need to be prepared to take on property maintenance duties to ensure that your premises remain in a good state of repair. This could prove costly if there are any serious issues with the building (such as damp or subsidence) so it is important to pay attention to the survey and take the advice of experienced property experts before you buy.
- Restrictions for renters: If you are particular about interior design or want your offices to look a certain way, leasing commercial property may mean that you are restricted in what you can do inside the property. You’ll also need to consider the potential cost of undoing any changes you make to the property if and when you move on.
Seeking advice from experts
If you would like further advice on buying or leasing commercial premises, our corporate property consultancy service may be able to help. Contact us for more information on 020 8866 0001.