Commercial Real Estate

Moving into your own premises is an exciting part of the growth of any business. It is a very visible demonstration of your commercial worth to customers, suppliers and partners. It can also help you to expand, giving you room to take on more employees, for example.

However, it can be difficult to handle the various stages of acquiring commercial premises, from locating a site, to getting a commercial mortgage, to securing the premises.

This guide takes you through the process from start to finish.

should you buy premises?

Think carefully about whether purchasing commercial premises is the logical next step for your business - take time to weigh up the pros and cons.

Advantages:

• You are free from worries about rental increases
• If the property increases in value, your business benefits from capital gains
• You may be able to fix monthly payments, to give yourself security over your outgoings
• Interest payments on commercial mortgages are tax deductible
• You may be able to sub-let a portion of the property, to lessen your mortgage payments (so long as your lender agrees)
• Your mortgage repayments are likely to be similar to rental on a similar property
• You can re-mortgage to raise finance
• You gain operational flexibility, because you can design the premises to suit your business, or to rebuild and extend as your business expands.
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Disadvantages:

• You will need to provide a deposit of between 20% and 30% of the value of the property in advance
• You will have to finance the upkeep and maintenance of the property
• If the property loses value, it will impact on your business capital
• Depending on interest rate movements, your mortgage payments could increase
• You have less flexibility to cope with changes in circumstances - to take on more or less space, or to move to a different location - than if you are renting
• Buying premises ties up cash flow which could be invested in new employees, or plant
• You will make property ownership a central part of your business, exposing yourself to an unpredictable market. This could leave you with a large and unproductive asset, which still incurs costs.