The right workplace – one which is ‘on-brand’, reflects your culture, is a catalyst for talent recruitment and retention, as well as productivity - is critical to the success of your business.
If you’re looking to buy a commercial property, there are multiple factors you need to consider. Our guide will help you successfully plan for and buy a commercial property which meets your brief, with minimum impact on your business.
On this page:
Choosing a commercial property
- Planning for Today's Workspace
- Type of Property
- Researching the Market
- Type of Investment: Leasehold or Freehold
- Costs of acquiring a freehold
Your workplace is probably your second largest outgoing, so when buying commercial property you have an even greater incentive to get it right, the first time.
Whether you’re choosing a commercial property for the first time or relocating to new premises, you have a great opportunity to create a space which will meet all your corporate, financial, commercial, occupational and team building goals. However, any move is always accompanied by a number of challenges.
Below are some top tips for finding the right commercial property for your business and making the purchase process as smoothly as possible.
Choosing a commercial property
When you’re choosing business premises, there are a number of factors you need to consider such as:
1. Planning for Today's Workspace
WFH is now an accepted part of the workplace mix which is why all organisations are considering what their unique ‘blended workplace’ protocols are.
You, therefore, need to think very carefully about:
- What your own unique ‘mix’ will be
- How you intend to use the workspace
- Will the emphasis be on formal and informal meeting spaces, with a smaller proportion (in terms of square footage) dedicated to hot desks
- Or would your firm prefer to have more (physically distanced) hot desks, with few/no meeting rooms or break out areas - as you can hire these by the hour
- Do you need your current workplace or, as so many of your team are WFH, a smaller workplace would suffice – maybe even a smaller workplace in a better location.
Planning your blended workplace strategy is unchartered territory for most organisations, so do seek the counsel of workplace consultants who, by working with you to tease out what your unique combination of requirements are (in terms of occupational, financial and strategic goals), arrive at a conclusion which best meets all of them.
2. Type of Property
You may already have a good idea of the type of commercial property you wish to buy. Commercial property in the UK can be divided into five main categories:
- Offices - any building which is used for commercial, professional, training or social value work
- Retail - shops, supermarkets, shopping centres and out-of-town retail parks
- Industrial – warehouses, factories and logistics hubs
- Leisure - restaurants, pubs, cinemas, gyms, leisure centers and hotels
- Healthcare – hospitals, specialist clinics and nursing homes
Under the Town and Country Planning (Use Classes) Order 1987 (and subsequently the Town and Country Planning (Use Classes) (Amendment) (England) Regulations 2020), different types of commercial buildings are categorised into ‘use classes’. These define how the property can legally be used.
It’s crucial to ensure that the business you plan to carry out is in line with the planning use of the commercial property you want to buy - or you may be fined. If you want to alter the property’s intended use, you may need planning permission.
3. Researching the Market
Once you have defined the type of property you are looking for, researching the market can help bolster your position.
Examine trends in the local and national commercial property market, considering factors such as current values, supply, availability of commercial mortgages and – if you plan to let the property – tenant demand and rental values.
Seeking advice from a specialist commercial property adviser is recommended. Not only will they possess in-depth local market knowledge, but they will also have intel regarding which properties are due to come on the market, plus any off-market opportunities.
Regardless of the type of property, you’re looking for, whether it’s an office, shop, warehouse or other premises, you should think about how its location will suit your business needs. For instance:
- Which transport links are available – public as well as roads/motorways
- What are the parking facilities and restrictions in the area
- What are the building’s delivery facilities and restrictions
- Are there any local congestion charges
- What are the local amenities available for employees
- How large and how qualified is the local pool of potential talent
- How important is it to be close to clients, partners and/or suppliers
- How will the premises truly reflect your brand and culture, to existing and potential clients and employees.
The location of your workplace is one of the few things which you cannot (easily) change after a decision is made, so it’s crucial that you make sure the location works for you, your team and your business – at the very outset.
Another important consideration is the size of the premises. Be realistic about how much space your business actually needs (taking into consideration future growth/’right-sizing’), instead of the amount of space you think you need.
In a post-pandemic world, you have to consider specific health and safety regulations and ensure that employees are safe at work – for example, physical distancing. For the most current advice, visit the HSE website.
In addition to a workspace, your team will need space for meetings, areas to relax, a kitchen and perhaps even an area to shower and change out of their commuting clothes. Most workplaces, especially offices, combine the efficiency of a contemporary workspace with facilities often associated with those at home.
Almost every workplace will already be connected to power, plumbing and heating with options for phone and internet. To ensure you have the right communications network for your business, start planning early and be absolutely certain you have the bandwidth connection you need, or you could end up incurring unnecessary costs.
You may also need additional communication services, depending on the type of business you run, so your property choice will need to either have these facilities already or allow you to install them. Bear in mind that you may need special permissions and licences if you need to make changes based on your business activities, so you should investigate whether this is possible before making a decision on a property.
7. Type of Investment: Leasehold or Freehold
A simple definition of each:
- Freehold: you own the land and the buildings on it
- Leasehold: you rent the property from a landlord for an agreed length of time.
NOTE: a leasehold agreement usually affords the tenant complete flexibility regarding the internal fit out of the leased property however, depending on the lease terms, the building will need to be returned to its original condition and configuration at the end of the tenancy.
8. Costs of acquiring a freehold
In addition to the price of the property, there are several other costs to consider when it comes to purchasing a commercial property, including commercial property tax:
- Stamp Duty Land Tax (SDLT) in England and Northern Ireland - the current threshold is £150,000. For property up to £250,000, the SDLT rate is 2%, while over £250,000 has a 5% rate
- Land and Buildings Transaction Tax (LBTT) in Scotland - the current threshold is £150,000. For property up to £350,000, the LBTT rate is 3%, while over £350,000 is 4.5%
- Land Transaction Tax (LTT) in Wales - the current threshold is £225,000. For property over £225,000 up to and including £250,000 is 1%, while up to and including £1 million is 5% and over £1 million is 6%.
Other costs you should consider include:
- Advice from professionals such as commercial property advisors, accountants, consultants (from workplace to technology consultants), lenders and solicitors
- Commercial mortgage arrangement fees
- Workplace fitout costs
- Office furniture and equipment such as communications, presentation, kitchen/facilities
- Moving costs.
There are inevitable pros and cons with each, therefore you should seek advice from professionals before you decide which route to take– to allow you to make an informed decision having weighed all the facts.
8. Secure finances
Once you have calculated all of the costs involved with moving, you need to consider/secure your finance. Irrespective of whether the move will be financed by a business loan, a commercial mortgage, raising capital from other sources (eg shareholders) - or perhaps the move will be funded out of operating funds - you do need to be 100% assured at the outset, that the funds have been secured and that the project will not be aborted mid-stream.
If you are applying for a commercial mortgage, you will have to provide lenders with a significant amount of information, including a business plan, a repayment schedule proposal, business bank statements and copies of recent corporate accounts. Most commercial mortgages range between three and 25 years: it is important to seek professional advice from a professional before making your decision.
Finding your perfect premises
If you're looking to rent new premises – one which meets your brand, financial, commercial and occupational goals then we can help:
- Use our advanced property search to see if any of the properties we are currently marketing meets your brief
- Get in touch: we will take your brief and, using our local market knowledge of what is on and coming to the market, we will find you the perfect property – one which will tick all your boxes.
We know that finding a new workplace is a time-consuming task and one which is only partly served by existing portals. Not only will we identify and shortlist potential options, but we will also provide you with a validated cost-benefits analysis of each property to allow you to make an informed decision.
When you’ve found your perfect premises, we will work closely with your legal team and other advisors to ensure that once the decision is made, the process is quick, efficient and has a minimum impact on your time and on your business.
Being a multi-disciplinary business, we also have a team of specialists who could help minimise your risks and liabilities and optimise the benefits of the move – from workplace and building consultants experts, to Business Rates advice and Service Charge specialists.
Contact Matthews & Goodman
To find out how our commercial property specialists could help you, contact us today by calling one of our UK offices, or complete our online enquiry form and we will get straight back to you.