Commercial Property

Commercial property is any building or land where business activities take place. There are numerous examples, but generally it is anywhere where profits are intended to be made (which is why commercial property is sometimes also known as income or investment property). So, examples could include:

• Offices of all sizes
• Factories
• Warehouses
• Bars, restaurants and hotels
• Garages
• Medical centres
• Shops, from high street stores to shopping malls
• Farmland

Commercial property, whatever the type, comes with its own set of laws and regulations, many of which are to residential property. For example, in any public building such as a shopping centre, as the owner you are liable for the safety of all people using that space and so much strictly adhere to all relevant health and safety requirements. Other commercial properties, meanwhile, such as bars or some factories, require licenses and regular inspections.

Buying or leasing?

The easiest way to secure a new property is through a commercial property agent, who will source premises for you. But before that, you need to decide if you want to buy your property or lease (rent) it. There are advantages and disadvantages to both, though generally speaking leasing tends to be best suited to growing businesses, while buying is best for companies that are well-established and have available funds to make the required significant investment.

Leasing – pros

• Flexible
• Removes the cost and hassle of having to sell when you want to move to new premises or expand

Cons

• Can be more expensive long-term
• The landlord will restrict what you can do with the building
• Regular rent reviews: generally speaking, rents only go up, never down

Buying – pros

• Provides you with an asset, which you can borrow against and which could appreciate in value
• Generally it is more cost-effective than leasing
• Gives you the freedom to do what you want with the building
• In the case of new builds, it can be designed to your specifications (though some landlords will also do this)

Cons

• Often involves a large investment and may require borrowing money
• Commercial property valuations are especially susceptible to fluctuations in the economic climate
• Potentially you will be liable to Capital Gains Tax when you sell

Commercial mortgages

Assuming you don’t have sufficient funds to buy your premises outright, you can apply for a commercial mortgage. There are a wealth of products available, from almost as many lenders; many choose to use specialist a commercial mortgage broker to help them find the right deal, though these experts will of course charge a fee for their services. Most commercial property mortgages require large deposits, of around 30 per cent or more.