Business location and premises are vital factors of any commercial operation, and one of the key decisions business owners have to make is whether to rent the property or invest in purchasing the freehold. At Bradley-Mason LLP, our experienced team of Chartered Building Surveyors are on hand to provide commercial building surveys and a full range of property services across many sectors to help our clients make the right decision.

Buying a commercial property can have its advantages, though these may arguably be greater for businesses that have been established for a few years. A lease or rental agreement is often a simpler arrangement and, although it constitutes a financial liability, the lower set up costs may make this more attractive for smaller companies. Let’s take a closer look.

Renting business premises

Recent start-ups and SMEs may find it harder to predict cashflow, meaning a shorter rental agreement or a flexible lease may be the best option to secure premises. The ideal agreement is one where the responsibility for repairs and renewals remains with the landlord. That way, the tenant’s dilapidations liabilities are kept to a minimum and the risk of being faced with large, unexpected bills at the end of the term is substantially reduced.

Bradley-Mason LLP can help with recording the property’s condition at the start of the term via a Schedule of Condition and we are proud to be one of the leading Dilapidation Survey specialists in the UK, with an experienced team available to advise both landlords and tenants.

The process of moving into rented premises is usually fairly straightforward, making a business relocation quicker and easier than mortgaging a commercial property. What’s more, there is no need to tie up large sums for a mortgage deposit to secure the property, and any decrease in property value won’t affect the balance sheet.

However, the pros must be weighed up against the cons, which can be significant, and include the following key considerations:

While the business will be sheltered from any fall in property values, it won’t benefit from any capital uplift either. The rent you pay will never offer you a return. In addition, rent increases can be both steep and unexpected, and they may be entirely out of your control. While there is always the option to up sticks and relocate if no acceptable solution can be negotiated with the landlord regarding rent increases or lease renewals, this is likely to be a highly inconvenient and costly pathway for the business.

Buying business premises

When it comes to investing in commercial property, lenders may exercise extreme caution when dealing with businesses that are not well established. Assuming a mortgage offer is made at all, it is highly likely that a larger deposit will be required and premium interest rates charged, as a way to mitigate the perceived lending risk. In any event, a deposit of 25-30% of the purchase price is not uncommon. Add to that stamp duty, legal fees and valuation fees and the upfront outlay may be substantial.

Variable mortgage rates can mean a sudden increase in payments without any protection. And, of course, we all know that property prices can go up as well as down. The worst case scenario is that you could find yourself in negative equity.

That said, buying the freehold does have some clear advantages, including the following points:

If the property increases in value, so does the value of your investment asset. Gone are the risks of unpalatable rent increases and periodic lease negotiations. Mortgages can be fixed for up to 10 years, enabling smoother cashflow projections than are possible if you are a tenant. What’s more, mortgage interest payments can be offset against your net profits, making your investment tax deductible.

As a freeholder, you can make alterations to the property as you wish (subject to planning regulations). At Bradley-Mason LLP, we have a dedicated project management team to advise on all aspects of a scheme, from the feasibility stage to the finished build. You can also sub-let part of the building without issue, which is usually not permitted when you are renting premises.

Prime commercial spaces tend to come with long leases of 15+ years, which is a long-term commitment that may not work for your business, especially if there is no workable break clause. As a freehold owner you have much greater flexibility and can choose to sell whenever you decide.

Contact us

Each business has its own unique set of requirements, which makes the decision to rent or buy entirely dependant on your individual circumstances. At Bradley-Mason LLP, our expert team of Commercial Chartered Surveyors and Building Consultants can provide valuable advice and guidance to businesses of all sizes and across all sectors. Why not contact the team and discuss your property requirements to see how we can help?

DISCLAIMER: This article is for general information only and not intended as advice. Each project has its own set of unique circumstances, all potential issues should be investigated by a surveyor on a case by case basis before making any decision.

Commercial property surveys are different from residential surveys in a number of ways, not least because they are far more comprehensive. These types of surveys also tend to focus on more than just a monetary valuation, taking into account the client’s business needs. For those involved in commercial property, whether you’re a landlord or you’re buying or selling commercial premises, here’s our guide to commercial building surveys, what they involve and the benefits of investing in one.

An Overview of Commercial Building Surveys

Commercial building surveys differ depending on the client’s specific needs – at Bradley-Mason LLP, we firmly believe that the reports and surveys we provide should be tailored to the specific requirements of the client. However, there are certain types of building surveys which are more common than others and cater to clients in a host of different industries and sectors.

A commercial building survey provides a detailed report of the building, from the condition of each aspect to any defects that have been observed and the maintenance that may need to be addressed in the future. The report will include any implications of Listed Buildings or liability concerns, as well as helping to assist with negotiations.

A building survey report is designed to focus your attention on any potential problems that may arise in the future and to identify if further investigations are needed. This may include looking at the energy efficiency of the building, mechanical, electrical and plumbing investigations and drainage investigations.

Commercial building surveys are the most comprehensive reports and are conducted by Chartered Building Surveyors. Every element of a property will be examined, from the roof to the floors and the walls. This report will inform you of the construction type and provide you with as much information about the property as possible, whether you already occupy it or you’re about to take on the lease.

A schedule of condition survey is an important document for commercial properties, which describes and records images of the condition of the building. It can be used as evidence for any claims of damage or dilapidation, and it will also describe the condition of each aspect of the property in detail to use as a reference in the future. For those leasing a commercial lease on a property, it’s likely that dilapidation surveys will also be required.

The nature of commercial leases means that a tenant can often be liable for repairs to the premises, so a building survey is a worthwhile investment that clarifies, in detail, the condition of the building and its composite parts. For anyone involved in commercial buildings, it’s important to understand the potential liabilities and the implications of taking on that property.

Why Should Businesses Invest in a Commercial Building Survey?

When it comes to commercial property, having a survey is an essential that will provide confidence in your financial investment. One of the primary reasons to have a commercial building survey on your property is to understand the construction of the building – commercial properties are typically different to residential buildings in how they are constructed.

The materials used, from reinforced concrete and curtain wall systems to cladding and steel frames, differ considerably from how residential properties are built and this can raise unique issues. With a trained surveyor carrying out a commercial building survey, you’ll be better informed about the investments you’re making.

Owning a building also comes with legislative obligations, such as health and safety risks which need to be taken into consideration. A claim can be detrimental to your brand’s reputation and your profit, so it’s important to be clear about any safety risks that the property poses.

For those leasing a property, a building survey also provides you with a record of the state of the building at your time of signing on to the time your lease expires, so that you’re not liable for repair costs and refurbishments. A surveyor will identify unavoidable issues and any defects so when the lease comes to an end, you’ll have a credible schedule of repairs that will help prevent any conflict.

If you need advice from a professional surveyor or you would like to book a commercial building survey for your property, Bradley-Mason LLP will be happy to help you. Get in touch today with one of our highly trained professionals to learn more today.

DISCLAIMER: This article is for general information only and not intended as advice. Each project has its own set of unique circumstances, all potential issues should be investigated by a surveyor on a case by case basis before making any decision.