Is buying or renting the better option for commercial property?

Given the uncertain financial climate, when it comes to commercial property, it’s important to weigh up the pros and cons of buying versus renting your next workplace.

Here, Carl Jones, a Director and Head of our Commercial Property department, explains the main considerations you need to weigh up:

Why rent a property?

Renting could be a better option for you and your business as it could provide greater flexibility as your business takes off.

Some of the benefits of renting include:

Upfront costs are low, although a significant deposit may be required
There is less capital tied up in the property, which means cash can be spent elsewhere
Depending on the terms of the lease, less exposure to building maintenance and repairs
You are less vulnerable to interest rate changes that might affect a mortgage.

While tenants may not be directly exposed to interest changes, it could affect the landlord who may wish to increase the rent to compensate for his or her increased costs.

It is important, therefore, to check any rent review clauses before signing the lease.

Why buy a commercial property?

Buying premises is a big financial commitment, but it does allow you to gain an income through letting or sub-letting, and benefit from any increase in the value of the property when you come to sell it.

Properties with the highest number of tenants usually bring in the highest return on investments and include:

Student accommodation
Multi-family use
Office space
Self-storage facilities
Retail stores, shopping centres, shops
Warehouses and factories
Leisure facilities like hotels, pubs, restaurants, cafes, and sports facilities.

You should consider how the pandemic has affected commercial property, particularly as more people are now working remotely.

If deciding to buy, a number of factors and costs should also be considered, including:

Professional fees
Stamp duty costs
Budgeting for repairs and maintenance
The cost of environmental compliance
Building waste management.

You will be subject to taxation at the time of purchase through Stamp Duty Land Tax (SDLT) and at the sale where Capital Gains Tax or Corporation Tax may apply.

The important thing is to check with your commercial property adviser at each step of the process as professional help can often mitigate costs.

Mander Hadley’s commercial property team can assist you with all aspects of your commercial property interests. Whether it is investment property, commercial property, leasing or buying, or financing the purchase of commercial property, our experienced team is able to undertake all of these matters for your business.

There are a number of issues to consider when buying or selling commercial property. Preparation of a sale contract, negotiating and agreeing terms, searches on the buyer or seller, as well as the property and funding, all take time. It is a major financial decision for the business and taking time to find the best legal advice may be crucial in securing a great deal, not just a good one.

Our commercial team are also very experienced in advising on the complex aspects of commercial property transactions including the requirements of Energy Performance Certificates, Asbestos Legislation, environmental issues, and dealing with banks, SDLT and registration.

For help and advice on all aspects of commercial property, please get in touch with us.