Choosing business premises: 10 things you need to know

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From offices and high street shops, to manufacturing facilities and catering sites, many businesses require premises to operate from. If you need a separate space for your startup, here are ten things to bear in mind.

1. Commercial classification

Commercial properties are divided into different categories that determine what they can and can’t be used for. Classifications include retail premises, drinking establishments, takeaways, offices, care homes and more.

Before you buy or hire premise, you need to check you’re allowed to use it for your business purpose. If not, you can apply for a change of classification but it isn’t guaranteed to be agreed. 

2. Costs

Be mindful of the costs associated with business premises. These include:

You might also have to pay for:

  • Fit-out / equipping the space

  • Moving costs

  • Service charges for communal areas

  • Cleaning and maintenance

  • Professional fees like mortgage lender or estate agent fees

  • Stamp Duty Land Tax (if purchasing property over a certain value)

Reducing business premise costs

If you need your own space but want to minimise costs, you could consider:

  • renting rather than buying premises

  • using co-working and shared office spaces

  • using flexible options such as market stalls and pop-up shops

  • outsourcing areas of your business

Business premises incentives

Some regional agencies offer incentives for certain types of businesses to locate in their local area. This might be through reduced business rates or a subsidy towards staff costs. Take a look at your Local Enterprise Partnership / Growth Hub.

3. Location

Your ideal location will depend on you type of business.

All businesses need to be mindful of access – can customers and staff get to your business easily on foot, by public transport or car? Is there parking nearby? Are there delivery restrictions? Is there a congestion charge?

Other considerations include:

Shops and restaurants

Consider where your customers are and choose a location that’s right for them. Ideally you need high footfall and easy access. Try to avoid locating your business beside your competitors unless you have a really strong differentiating factor that’ll make you stand out.

Office-based businesses

Passing trade is less important but you’ll need to have somewhere the staff can get to easily (think public transport and car parking). Don’t forget the importance of providing somewhere safe and desirable for staff to work; it’ll help you recruit and retain workers. You’ll also need to ensure you’ve got good broadband and phone coverage.

Warehouses and factories

Think about transport and logistics. Ideally you want somewhere close to major road and rail links.

4. Lease duration

Commercial leases can be much longer than domestic leases, often several years. For a startup or small business, which may lack confidence in its long-term viability, this can be too long.

Ask the landlord if you can include a break clause in the contract. This means you can end the lease early if you need to.

You might also be able to sublet to another business if you no longer need the property – hopefully because your business has grown and moved into bigger premises!

 5. Capacity

Is your business likely to grow in the next few years? If so, does your chosen property provide room for the extra staff, storage or equipment this might involve?

Moving premises can be costly and disruptive, so, ideally, you need to find something that’s affordable for your current budget but still has room to grow.

Don’t base your decision on floor plans or measurements – there’s always smaller than you imagine! Make sure you visit a property before entering into a contract.

6. Condition

Make sure you check the condition of any business premises you’re considering. Damp, mould and dodgy plumbing can be unhealthy and off-putting for staff and customers.

Plus they could cost you time and money if they cause damage to stock or lead to an accident or injury.

It is advisable to commission a building survey, just as you would with a domestic property, before you sign any contracts.

7. Legal compliances for business premises

Your business premises will need to meet all relevant legal compliances. Your local authority will be able to advise you on this.

For example, food businesses must have handwashing facilities for staff, toilets and changing facilities, and facilities to clean food and equipment. Without those, you can’t trade legally.

8. Questions to ask before renting business premises

To make sure you’re making the right decision for your business, ask questions like:

  • Rent – How much? When is it reviewed? Are there any rent-free periods?

  • Business rates – What is the rateable value? Who is responsible for paying?

  • Bills – Who is responsible for utility bills? Are they included in the rent?

  • Other charges – Do you have to pay a service charge? Or to use the car park?

  • Lease – How long is the lease? Are there break clauses? Can you sublet? Do you have the right to renew?

Note that, unless there is an extenuating reason, you should have the right to renew your lease after it ends. This is set out in the Landlord and Tenant Act. 

9. Finding business premises

Your local authority is a great place to begin your search. They can advise on available locations as well as any legal requirements your premises need to meet. You can also search through a commercial estate agents.

10. Business premises paperwork

Heads of Terms

Once you’ve made an offer on business premise, you’ll discuss the terms with the landlord. Once agreed, these will be written up in a document called the ‘Heads of Terms’.

It includes details such as the rental value, length of rental term, payment schedule and timetable for occupancy.

Once the Heads of Terms are agreed, the contract will be based on this, for you to sign when you’re ready to complete the deal.

Condition report

If you are renting, you should document the condition of the property, with photographs. This will ensure that you’re not held liable for any existing damage to the property when you vacate it.

Local searches

If you’re planning to be in your premises for a long time, you may also want to pay for local searches to find out if there are any plans that could impact your business. For example, changes to roads or parking regulations.

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