property
To buy or to rent?
Dan Smith, of M4 Property Consultants looks at the pros and cons of buying or renting your new commercial premises...
N Cons
Cash-flow – A significant amount of money is required to fund the purchase of a commercial premises. Typically, the business may need to provide a 30 per cent deposit. Consideration needs to be given as to whether this investment can be justified or whether the money would be better spent on new equipment, staff training, etc.
Flexibility – purchasing a commercial property should be a long term commitment. Relocating can prove more difficult if a business owns the building. If the business is growing rapidly or the industry it works in is experiencing radical changes, they need to consider if purchasing is the right option.
Time – It can be a lengthy process to identify and acquire the right commercial premises. This can be eased by employing a chartered surveyor to work on your behalf in the acquisition.
38 THEbusiness QUARTER
ew and existing business will often need to consider the decision whether buy or rent commercial premises. Before a business
makes this decision, there are a number of factors that need to be considered...
Buying commercial premises Pro’s
Fixed costs – the business owner will have greater certainty of their fixed costs which will be of benefit when making future projections and plans. Allowances would not have to be made for potential future increases in rent etc.
Tax benefits – owning and managing your own business premises can provide tax and expenses deductions.
Additional income – surplus space within the premises can be sublet to generate additional income.
Investment – unlike renting, the company will be investing in the purchase of the premises. If commercial property prices increase, you will benefit from those gains. Property can also provide a valuable asset on the balance sheet.
Renting commercial premises Pro’s
Free-up working capital – renting usually only requires the business/entrepreneur to pay an initial deposit and then a quarter’s rent in advance. This ensures that available cash can be invested in the development of the business, not the property.
Time – allows the management more time to focus solely on running the business.
Prime location – Sometimes, particularly with retail property, renting is the only way to secure a prime location. This may be fundamental to the business success and more important that purchasing a property.
Cons
Variable costs – Commercial leases often contain rent reviews which mean the rent could increase. Service charges may also increase. These costs are difficult to control.
Lack of investment –When renting, the rent paid assists the owner to pay their mortgage and provide them a valuable asset, not the business occupying.
Restricted by lease – Leases provide a number of restrictions within them. These vary on individual properties. However, opening hours may be restricted, the permitted use within the building may be limited and other restrictions may apply.
There are clearly advantages and disadvantages to both buying and renting commercial property. However, many factors can impact this decision such as an individual business’ requirements, the current and future financial position of the business, the potential for expansion, the state of the local property market and many more. That is why it is crucial to consult with professional advisors including your accountant and your chartered surveyor.
Serviced offices – the small business’ flexible friend?
Over the last five years, there has been a gradual increase in the number of serviced
offices available for rent by businesses along the M4 corridor from Chepstow to Newport. Owned and managed by national and local companies, each has a slightly different pricing policy with varying items included in the rent. Each has their own advantages and disadvantages, depending on what type of business is looking at them. But what are serviced offices and what benefits do serviced offices provide for their tenants?
Serviced offices are a great way for new businesses or SME’s to establish their base, often located at a prominent, easy to find business address, and providing tenants with the flexibility they require to develop their
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