Should you rent, buy or build your commercial premises? Each solution has its benefits and drawbacks. Here is a brief look into each option to help you make the right choice.
Rent
By far the most common option is to rent commercial property. This involves signing up to a lease lasting anywhere from a few months to several years in which you pay rent to the property owner every month.
Renting is often less of a commitment – it doesn’t cost as much upfront and you often have less maintenance responsibilities. There is also a large choice of commercial properties to rent – including the option of cost-effective shared offices and pop-up store outlets. It is a good option for relatively new businesses that are still growing and uncertain of their future direction.
The downside of renting is that you may have limited control over how you modify the property, plus you don’t build any equity. Rent rates may also be quite high in some areas.
Buy
Buying a commercial property requires a lot more commitment, however it has many perks for businesses that are already established and thinking long-term. You can buy a property outright or take out a commercial mortgage. A large down payment is required if you choose the latter option, but it’s a lot less than buying a property outright.
Owning a property can greatly boost the value of your company. Over the years, you will build equity and the property may appreciate in value. You also have a lot of flexibility as to how you modify the property – which could be important for certain types of business. You may even be able to rent out parts of the property to other businesses.
Most companies can’t afford to buy property or are not certain enough about the future to commit to property ownership. Applying for a commercial mortgage can also be quite time-consuming, and there are many potential extra running costs to consider like repairs and general maintenance.
Build
An often overlooked option is to build your premises from scratch. This can be more expensive upfront than buying a property, but it has its advantages.
Building your own premises allows you to customize it completely to your needs. Everything from the building layout to parking can be custom designed. This allows you complete control over how your business functions.
You will of course need land to build on and full planning permission to carry out your vision. A self-build mortgage may be able to fund the project, but could require a high down payment, making this only feasible for those that already have a lot of savings. Of course, it depends on what type of property you’re building – constructing a small office in your garden to use for business use could actually be a more affordable option than buying an existing building.
Conclusion
Renting is the best option for those with less money to spend and for those that don’t want to commit as much. Buying a property is ideal for those who want to add long-term value to their business. Building a property meanwhile offers full customization as to what you want your premises to look like.
