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With the right premises, your business will be easier to run – and more
profitable!
But unless you approach the search in a logical and organised way, and take
advice where necessary, you risk overlooking some problems, which may turn out
to be vital later.
What do I need to
think about when deciding on premises?
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Decide on location. If you get this wrong the only way to correct your
mistake is to move again! If your business is in manufacturing, ease of
access to sources of raw materials and to your markets may be essential.
If you are running a shop, it should be in a location where the public
will notice it and find it easy to visit. For cost reasons you may have to
accept some compromise.
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Consider your business strategy. The number of people you will be
employing, the processes used in the business and the plant/machinery
required. The type and location of property needed for a manufacturing
business with heavy plant ill be different from that of a software or
distribution business. What are your ongoing plans? Is there space for
expansion or will you rely on a move to larger premises at a later date?
Think about the quality of the workspace environment and how this may
impact on the staff and their productivity. All of these need to be
thought through before you make a final choice about your premises.
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Prepare a specification of the premises you want. Sketch out a plan on
graph paper, detailing your requirements. From this you can work out the
floor area you need. Don't forget car parking and loading and unloading
facilities. And remember your utilities needs - what power supplies will
your processes require, what telecommunications facilities, for example?
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Decide whether to buy or lease the premises . Work out how much you
can afford to pay in outgoings on the premises, whether you buy or lease.
As well as rent or mortgage repayments you need to allow for general
rates, water rates, service charges and insurance of the building.
Armed with this information, you will be able to give a chartered
surveyor a succinct summary of what you are looking for. Your chartered
surveyor will provide independent advice on the size, type, form of tenure
and location of premises that best suit your needs.
What are the pitfalls and safeguards when
taking on premises?
-
Check the state of repair. Your chartered surveyor plays a key
role here and will be able to advise you on the repair outlays you are
likely to face. If you are leasing the property, you need to be clear
who is responsible for repairs: the landlord or you, the tenant
-
Check the property has planning permission for your use and that
there are no restrictions on your ability to run your business, (such
as a limit on working hours or noise). If you need to get planning
permission for your use, remember to allow eight to ten weeks (and,
unfortunately, sometimes a lot longer) for the local authority to
process the application. Altering services such as electricity and gas
can be extremely expensive, so always make sure the property has
adequate mains services in good order
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Make sure the premises comply with health and safety requirements,
including fire regulations and access under disability legislation
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Pay attention to the clauses relating to service charges, rent
reviews, sub-letting and assignment, repairing and decorating
obligations and personal guarantees. Also make sure you know whether
you will have security of tenure
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You may want to change the building to suit your needs. Almost
certainly, you will have to get your landlord's approval for these
works before carrying them out so need to allow time for this.
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Make sure you understand which fixtures and fittings will be
removed when the previous occupier leaves.
If your business is a start-up think about going for a licence to
occupy rather than a lease. Another option, mainly in the case of office
space and mainly in major urban areas, is to look for serviced office
space. Here you enter into a service contract rather than a lease, which
may provide you with workstations, secretarial services and so on as
well as the office space itself. Such contracts range from the very
short term to long-term arrangements.
What financial help is there for businesses
setting up in new premises?
Grants and other incentives might be available from central government
or your local authority. Contact the Economic Development Unit of your
local council or the local Business Links Office, which will advise you.
How long should I allow for finding premises?
Plan well in advance. It will vary with the circumstances but, as a
rough guide, allow between three and six months. It is vital you are in
control of the timetable, so you are not forced into hasty decisions.
Owning or
leasing
Deciding whether to buy or lease your premises is not easy.
Sometimes you will not have the choice. But it is an important
decision, with strong arguments both ways, and it could vitally
affect the future development of your business.
Where do I start?
With your business itself. Is it a mature business? Is it a young
business, which you expect to remain roughly at its present size?
Or, if all goes well, will it expand in the future? Try to build a
picture of where you expect the business to be in five years' time.
Leasing is generally more flexible than buying, at least in the case of
a short lease. If your business is currently small but you expect it
to grow, leasing or even a licence might be the best option. As you
need more space you can move on to a larger building without the
hassle of having to sell your original premises. With industrial
buildings in particular, design trends change quite a lot and if the
building you lease becomes outdated you can move to one that meets
current needs.
But if you buy a building it can be changed if you find you need
more space in future. Some businesses need lots of room for plant
and equipment in the building, with high installation costs. As you
will want to write off these costs over many years, you will not
want to change premises at frequent intervals. In this case, buying
may make more sense than leasing. If you do take a lease, it will
need to be a long one.
Would I have more freedom as an owner?
Aside from the question of moving premises, owners generally have
more freedom.
-
You don't need to get a landlord's approval (with the usual
time delays and costs) for changes you want to make
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You would be able to extend the building. Although you will
still be subject to the same external constraints, such as
planning permission
-
You will not be faced with the administrative inconvenience of
negotiating rent reviews, renewing your lease or of arguing
dilapidation claims if you move out
-
On the other hand, you still need to maintain and insure the
building, whether it is for you or a landlord.
Which saves me more money: owning or
leasing?
This is where the two-way arguments are at their strongest. Many
larger businesses believe their capital is better employed (and will
earn higher returns) in the business itself, not tied up in the
company's properties. They tend to lease their buildings rather than
own them and even dispose of existing buildings via a sale and
leaseback (this is where the property is sold to an investor, but
the occupier remains in occupation as a tenant, subject to a lease).
The decision depends partly on the way you expect the property
market to move. If rents move up rapidly, as a tenant you could face
big increases in your rent bill when the rent reviews occur. And if
you don't own the property, it is the owner, not you, who will
benefit from any future increase in their capital value.
If you own your property, you will get the benefit of any capital
gains and will own an asset at the end of the day. If the building
increases in value, you might be able to borrow against it in
future, which could extend your financing options. You will not have
to worry about a rise in your occupation costs following rent
reviews.
You need to discuss this with your accountant as there may be
some tax implications flowing from the decision to lease or buy.
Further information
You'll get clear, impartial, expert advice on these issues from
an RICS member. They are highly qualified professionals with the
letters MRICS or FRICS after their name, and are bound by strict
codes of conduct. These are your guarantee of their skills,
integrity and depth of experience. Whatever type of business
property you have, chartered surveyors will provide you with the
right advice.
Chartered surveyors are members of RICS (The Royal Institution of
Chartered Surveyors), one of the most respected, independent
organisations for professionals in property, land, construction
and related environmental issues worldwide.
For more on how RICS members can help you, and to 'find a
surveyor' near you, contact RICS
T +44 (0)870 333 1600
contactrics@rics.org.
Lines are open Mon-Fri 0830 - 1730 .
Or visit
Find a
surveyor
Click here
for a quote and to instruct your survey online
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