Choosing where to base your business might be the difference between floundering and flourishing, but it’s not easy to get it right. Now, that the property market is picking up again, commercial tenants or even prospective buyers, don’t wield the same power they might have done five years ago, so you should research locations, prices and lease terms very carefully before proceeding.
Finding the right footfall
Matching your location to your customer base is one of the most crucial parts of choosing business premises, particularly if you are a leisure or retail business. Your immediate catchment area is less important if you are an office based business, but if you rely on passing trade or your backdrop is a big part of your business model, like a restaurant or nightclub, for example, you really need to consider your target audience carefully. It can be very difficult to change the identity of an area, especially if you don’t have a big budget behind you. If you’re a retailer or a bar owner, look at the businesses nearby and see if they buy into the same image that you do. It’s also wise to think carefully about the history of the premises you’re considering. If you’re the ninth nightclub to set up at a site in ten years, then there’s clearly a problem with that location, and you’re going to need to have a spectacularly different vision – and possibly budget – to turn it around. There are some exceptions to this rule obviously, but generally regeneration is a collective and, often, convoluted effort, and for every individual business that successfully changes the face of a street. There are another ten that don’t.
Attracting a skilled workforce
As well as considering your location for customers, you also need to think about its suitability for the staff you require. Consider the profile of your workforce, not just now, but also as you expand. Do you rely on a particularly specialised workforce, and if so, are they likely to be located a convenient radius from your new premises, or convinced to travel there. If you employ a lot of shift workers, students or a young workforce, you might need to give extra consideration to public transport routes and whether trains or buses coincide with their shift patterns.
But more important than location – according to the data – was ease of commute.
Of 1,000 UK adults surveyed, 78% said the accessibility of an office was a major factor. Proximity to a major railway station was ranked as the most appealing geographical factors followed by proximity to shops, restaurants and gyms.
The study revealed that on commutes under 60 minutes, 60% of public transport users would favour a longer commute with fewer changes over a shorter commute with more changes.
Anecdotally, commuters reported a preference for ‘settling in’ to to a longer commute than having to change trains or change from one mode of transport to another. In short, a simple commute to an office located close to a transport hub is more preferable than a shorter, yet more complex commute.
This preference remained true for commutes up to 60 minutes, but on commutes taking more than 60 minutes, the majority said they would take a more complicated route if it meant shortening their journey by ten minutes or more.
Enterprise Zones and Grant Funding
For some businesses, particularly start-ups, public funding, tax incentives or rates relief might be an important factor when choosing premises. Some cities in the UK attract funding from particular grant schemes that have been designed to regenerate the area, and if you’re thinking about applying for funding anyway, you might as well check if the premises that you’re looking at fall within the eligible zone. In addition, there are currently a number of Enterprise Zones around the country and if you relocate to premises within one of them you may benefit from business incentives that encourage innovation – a common example is 100% rates relief.
Check your business rates
Business rates are also a key consideration, when it comes to choosing premises. If you’re an established business, looking to relocate, you might already be aware of the controversy surrounding business rates. A lot of SMEs and commercial landlords feel that the business rates for their property are disproportionate, compared to its rental value, so much so that a business rates overhaul is a common theme in the main political parties pre-election manifestos. How the situation resolves will probably depend on who is victorious on 7 May, but whoever’s pledges become reality, it’s still worth checking business rates when you view potential premises. Make sure that they are proportionate with the rent, that you can afford to pay them and explore whether any rates relief is available.
Check the legal loopholes
Once you’ve found the perfect base for your business, you need to look at the legalities before you sign your life away. At this point, professional representation might be handy – either a commercial property adviser to help with lease negotiations or a legal adviser to check the ins and outs of your lease. If you’re buying your commercial property, it goes without saying that you need a commercial conveyancer, but even for a leasehold property, you might want to seek advice before signing your life away!
If you’re renting your premises, you need to consider your lease carefully. There are several types of leases for commercial tenants – some which are very beneficial for the landlord and others that are weighted in the tenants’ favour. The most common type of commercial lease, particularly for longer terms is an FRI (full, repairing and insuring lease), which, as the name suggests puts the onus of repairs onto the tenant – the landlord will often reap back any expenses through service charges.
Negotiate the benefits
If you commit to this type of lease, try to make sure there are other benefits for you, as a tenant, such as cash contributions, lease breaks or rent-free periods. Although demand is picking up in the commercial property market, the balance of power hasn’t completely tipped yet and if you’re seeking premises in a less high-profile area, you should still be able to negotiate some perks. Lease breaks are essential, especially if you are signing up to a long lease as they provide a get-out clause if things are not going to plan. Rent reviews are of no benefit to a tenant so you want these to be as few and far between as possible. Remember that commercial leases are always open to negotiation – you don’t have to accept the first offer put in front of you. Do your homework about the area that you’re looking at, check the local business news, and commercial property websites and talk to other businesses nearby to gauge what the going rate for rent is, and then use this knowledge to negotiate the best rate possible.
Whether you’re relocating or looking for your first business base, finding premises doesn’t come cheap. At Funding Guru, we can help with commercial mortgages if you’re looking to buy, venture finance if you’re aiming to grow, or a business cash advance loan if you just need a short-term boost to cover relocation costs. Give us a call on 03330 069141 today to find out more.
