Buying your first commercial property is an exciting but daunting prospect – it’s a significant investment into your business but it requires plenty of research and due diligence to ensure you’re choosing the right space. When you are buying premises for the first time, doing your homework is everything, and this is where Squarepoint Chartered Surveyors can help. We’ve put together 11 questions you should be asking before you invest in a commercial property.
1 – What is the purpose of the property purchase?
No matter what type of commercial property you’re looking to buy, you need to be clear on its purpose. The biggest mistake you can make as a business owner is to invest in property without a clear plan on why you need it and the purpose it serves for you. Create your purchasing criteria before you start looking so you can be confident that the properties you view will meet your specific needs.
2 – What’s the condition of the property?
You don’t want to occupy a property that’s falling apart or is in need of costly repairs, so make sure you thoroughly inspect for any signs of damp, electrical or plumbing issues, roof problems and other problems. Having a condition survey carried out will provide you with peace of mind that every aspect of the property has been checked by a qualified surveyor.
3 – Is the property in the right location?
Location matters, particularly in business, so you’ll need to assess whether the location of the property in question is right for you and your company. The industry you work in will impact the type of location you need – a retail space, for example, will benefit from a central location with plenty of footfall while a business where customer parking is needed might benefit more from a building on the outskirts with more space. You may need access to public transport for your staff or need to determine the level of competition nearby. All of these factors, and more, will be critical to deciding whether a location is right for your business.
4 – Do you have a realistic investment budget and ROI goals?
Investing in property shouldn’t be an emotional decision but all too often it is. First, set a firm budget and stick to it – don’t overstretch yourself and make sure you can comfortably make any payments necessary. This includes allowances for hidden costs, including professional fees and stamp duty, mortgage payments, ongoing operational and maintenance costs, construction and repair costs, environmental compliance and waste management costs. Set an ROI standard of 10% minimum cash return to make the investment worth your while.
5 – Have you sought advice from commercial property professionals?
While it’s important to see the property for yourself, you also want to take advice from experts in the industry. When you’re buying commercial property for the first time, there are bound to be factors you haven’t considered or might overlook, so having a second pair of eyes can really help you make a sound investment. From an experienced accountant and conveyancing solicitor to a thorough commercial building survey to avoid any nasty surprises later on, rely on professionals who have the experience to assist you in this venture.
6 – What is accessibility like?
Just like amenities like parking, you’ll want to consider how accessible the property is for your staff and clients. Whether it’s a retail store or an industrial space, accessibility is vital to prevent issues in the future. Make sure the property has access for wheelchairs, lifts for those unable to use the stairs and if there’s enough space for industrial vehicles to enter.
7 – How much flexibility does the property offer your business?
Assuming that business growth is your objective, as it is for so many, it’s a good idea to find premises that allow you to adapt and expand. Commercial property is more sensitive to economic movements, so your new property should be adaptable to any shift in market trends and changes within your business operations. Could you repurpose the premises to protect your investment and minimise costs if it came to it, such as for co-working spaces, storage facilities, subletting or parking, as ways to change the way the premises can work for you. You also want to consider whether there are limitations on what you can do within the property. If changing aspects of the property is something you want to do in the future, make sure this is possible before signing on the dotted line.
8 – How has the property performed historically?
Are you aware how previous commercial tenants have found the site, and if the property impacted their successes or failures. It’s important to learn from the mistakes of previous occupants so you don’t repeat them, but also make a note of things that have worked well for them. If a previous tenant has performed well, you can take that as a positive indicator that the property may work well for you too.
9 – Is the property eligible for any relief allowances?
The government’s capital relief allowances are aimed at rebuilding communities, so your property may well be eligible to claim Capital Allowance (against taxable profits), Business Premises Renovation Allowance (BPRA) in disadvantaged areas, or Land Remediation Relief from corporation tax. We highly recommend that you check with your local estate agent or broker.
10 – What is adjacent to the property?
It’s worthwhile paying attention to what’s surrounding your commercial premises. For example, if you’re buying a retail property, you want to make sure you’re not setting up right next to a direct competitor, but also that the businesses around you are performing well as this may indicate your own success. Similarly, you want to consider how development projects and construction works right next door might impact your own business.
11 – Are you sure you’re ready to go through with the purchase?
While there’s no such thing as a risk-free investment, it is essential that you take time to weigh up the pros and cons of the commercial premises you have your eye on, so you can be sure that you are making the right decision for your business. Investing in commercial property is a significant financial commitment, and you need to carefully evaluate factors such as location, condition, zoning regulations and potential for growth or redevelopment. Conduct thorough market research, consult with professionals like commercial estate agents, lawyers and accountants, and analyse the property’s potential ROI, including operating expenses, to make sure you’re getting a good deal.
Don’t be tempted into thinking that you’ll be making a quick profit in the commercial property market. Unlike residential property, which can sometimes appreciate rapidly in hot markets, commercial property is generally a longer-term investment. There are no short-term gains to be made here, and capital appreciation should only be one of many long-term benefits. The real value of commercial property often lies in its ability to generate steady rental income, tax advantages and potential for value-added improvements or redevelopment over time.
Contact Us
At Squarepoint Chartered Surveyors, we offer a full range of commercial building surveys to help with your purchase including Acquisition Surveys, Condition Surveys and Disability Access Surveys. To discuss your surveying needs and share your plans to buy commercial premises in London, please get in touch.
