How to find and fund your business premises

Looking for your next business location?

Tips and advice on finding your next business premises and finding the best source of funding

Choosing the right premises is a major decision for many businesses. The right location can be critical for attracting customers and employees, while the premises themselves can significantly influence productivity. In reality choosing the right location is about doing a lot of leg work, and using your head more than your heart.

As a business grows, space can become inefficient. However, the move to bigger premises can be costly and daunting, particularly if time and money are tight.

As any business will tell you, having the right premises can be the difference between failure and success. Not only do you need to consider the physical space but also the geographical location and how this will have an impact on the business in terms of recruitment and networking.

You also need to take into account how the decision to lease or buy your premises affects your costs and the flexibility you'll have if your premises requirements change in the future.

Many people think that purchasing your premises requires considerable cash upfront, not understanding that some financiers prefer lending to businesses who purchase their own premises. Many of these banks will requires less deposits than their usual investment criteria. Contact us for more information regarding this.

How to find the best location for your business premises

It serves no purpose to occupy a grand building, even at minimal rent, situated kilometres away from the business’s customers and suppliers. Draw up a list of what you need from your business premises. How important is property size, layout, location, facilities, structural requirements and parking to your business needs? Also think about your long-term business plans and how these might affect your choice of business premises. For example, you might want to expand or alter the property in the future.

Which area do you want to be in?

 

Where are your customers? If your customers are based in a particular geographical area, it makes sense to locate your business where they can easily find and visit you. This is essential for retail businesses. If you provide goods and services to the public, the building must provide good access for all, even disabled parties.

Where are your competitors? Do you want to be close to a cluster of competitors that attracts customers, or to have exclusivity in an area? Proximity of Competitors is not always bad for business! It may be hard to believe but the proximity of competitors may actually help you attract more clients. This is because a higher concentration of similar businesses makes the clients/customers start to associate that area with a particular service/product(s). As a result, the area attracts more people than it would if there were fewer competing businesses. And in the end, there is more business for everyone.

Do you want to be close to particular suppliers? Could this give you flexibility on stock control or reduce your transport costs?

READ: Should you start a business on a part time or full time schedule >

How expensive is the area?

New suburb and developments are often cheaper, but may not be suitable.  Prices are lower in areas with vacant property, but that may indicate that the area is not good for business.  It's also worth noting that setting up in certain locations may qualify you for grants or other financial incentives.

Must you be near transport links?

 

Can customers, suppliers and employees reach the premises easily? Do you need to be close to motorway links, train stations or other public transport?  Base your business in the right place and you'll be able to find the right staff easily. Conversely, the wrong location can leave you struggling to find the right kind of skills and expertise. Will the location meet employees' needs for housing, schools, shopping and lunch?

Should you move to the CBD or in the suburbs?

The CBD offers several advantages:

 

-You can increase your visibility to potential customers and a good address may be important for your image.
-The combination of a central location with easy access to everything, and modern offices thoughtfully designed to make work and life easier provide a clear boost to team morale. It’s easy to see that providing this type of working environment makes it easier to both attract top talent, and retain staff. In this highly competitive environment, being viewed as an employer of choice is essential to the on-going success of any small business.
-A key factor to success is being aligned with like-minded businesses or competitors. Sharing a building with businesses where you can exchange services or customers is an advantage. to drive your business towards new opportunities and innovations.
-You will have good access to public transport.
-You will be close to facilities such as a post office, banks and print shops.
-Businesses which usually prefer CBD locations include retailers, employment agencies and professional firms.

A CBD location may not suit you:

-Prime locations tend to be expensive.
-Car parking may be difficult and expensive, for both employees and visitors.
-Access for deliveries may be restricted.
-Noise and pollution may be worse.
-Office space may be older and lacking modern facilities.

Many new office developments have been built outside the CBD in outer suburbs or "urban villages":


-There is usually plentiful parking. Some employees place a high premium on being able to drive to work.
-Business parks generally have modern, well-equipped office space.
-A newly built development should be clean, attractive and safe.
-Businesses which often prefer out-of-town offices include sales operations, manufacturing businesses and call centres.


Out-of-town business parks also have disadvantages:


-Estate maintenance and management charges in a business park can be surprisingly high.
-Some business parks are located in run-down former industrial areas. Your employees and customers may find this off-putting.
-Employees without cars may find getting to work difficult.
-There may be few shops or places to eat nearby. With fewer places to socialise locally, employees may not spend much time together outside working hours.

All too complicated?

Running a business is hard enough, if you want some advice on you can fund your business premises, feel free to contact us.

What’s your budget on the business premises

 

The temptation for every small business looking for its first premises is to go for the cheapest property available. That’s a false economy and can actually hold your business back.

Cheap property is cheap for a reason. It might be badly maintained, unfit for purpose, too cold, or too hot. If it looks like a bargain basement you may struggle to attract staff, let alone customers.

The sensible route is to work out a realistic budget for your premises before you start looking at prices. What do you want to spend, and what’s the most you can afford to pay? Don’t forget to take into account all the financial aspects of premises: rent, rates, electricity bills, phones, etc.

Then when you are weighing up the different premises available, consider the pros and cons of each before looking at the price. If your chosen premises are still the cheapest – congratulations!

Your premises requirements

 

Draw up a 'property spec', including all the details of what you are looking for. Note which aspects of the spec are essential, and which are just desirable. A good spec will stop you wasting time looking at premises which are non-starters.


Decide where you want to be
 

How important is location? How flexible can you be? The premises must have the proper planning permission allowing it to be used for your type of business.

Decide on your total space requirements

 

Size is often the thing which dictates when a business moves. As more staff or equipment come on board, existing premises can suddenly seem cramped. Health and safety laws provide guidance on how much space is needed for each employee or to do manufacturing.

If your business has outgrown its current premises, it’s easy to assume that more space will solve the problem. But, while more square metres will undoubtedly provide more flexibility in terms of future growth, a larger space may not prove any more usable due to poor layout and inflexible arrangement options.

Work out how much space each person needs. Take into account any space that could be saved through hot-desking or flexible working. For example, if employees are not all in the office at the same time or sometimes work from home. Decide what additional space will be needed for equipment, meetings, storage and socialising.

When you are examining potential new premises, consider what you will do when you run out of space again! Can your building be altered inside by knocking down walls or installing a mezzanine floor? Is there additional space you can get your hands on nearby, or would you be allowed to extend?

Think about layout

 

Often business premises come with a pre-existing ratio of warehouse-to-office space, or workshop- to-office space, which is usually a legacy of the previous occupants. If, for example, only one office is needed, ask the landlord to knock down the walls of the office space not required, to result in your ideal ratio of office to productive space.

-Regular rectangular floors with a minimum number of pillars provide the maximum amount of usable space.
-Open-plan space is more flexible, since you can divide or reorganise the space as your needs change.
-Individual rooms offer privacy and are quieter.

And remember, always factor future growth into your commercial property decision — because who knows where your business might be in a year’s time?

For growing companies looking for new business premises, it might be worth finding a property that affords flexibility and the option to expand. Choose to buy a commercial property rather than rent, and you’re more likely to be able to expand the premises in-line with future growth — if planning permission allows, of course.

Need help with buying your next business premises? Contact us for a free consultation.

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Identify your access requirements

You may need access for employees, customers and deliveries outside working hours. Do you need to be on the ground floor? How many entrances (how wide and how high?) do you need?

List the services you need

 
-For example, power, phone lines, good broadband, plumbing and drainage. How many power points and phone sockets will you need? Can these be upgraded or altered to suit the specific needs of your business? If so, how much is this likely to cost on top of other setup and rental fees?
-Modern buildings may offer air conditioning, cabling ducts and good security built in.
-Does the work you do call for particular facilities (eg gas or three-phase power)?
-Do you have plant or processes that need special ventilation or air conditioning?
-Do you have special requirements for waste disposal and drainage?
-You must comply with the building’s fire safety and health and safety regulations. If you operate an at-risk business, make sure your day-to-day operations won’t breach safety legislation.

Be clear about structural requirements

An older building may look nice, but will the wiring and plumbing be adequate? Will expansion or layout changes be possible? Must your premises have special physical attributes (eg overhead clearance, upper-floor loading or reinforced foundations)?

Many landlords build mezzanine levels to increase the square metres they can rent out. It may work well as office space, but stairs make it a bad idea if you want to use it for storage, and the low roof can limit your ability to stack goods. Mezzanine space should normally be rented out at a lower rate.

Appearance and comfort matters

 

How important are these for visitors and for employees? Where image really matters, the big serviced-office companies offer immediate access to smart, fully-equipped, flexible offices. Many also provide support services on demand. What are your requirements for light (natural and electric) and heat? Dark offices lead to more sickness and low productivity, so money saved by renting an office with poor light may be a false economy. What facilities (eg WCs, a kitchen) will employees and visitors need?

Security issues


No matter what your business, your premises will house valuable assets and stock that make it a target for criminals. To safeguard your business against crime, security should be a priority when searching for new business premises. If you’re renting a property, find out what security provision is in place to protect your business before you agree to let the property. If you choose to buy new premises, make sure planning regulations don’t restrict you from implementing the right security devices, such as CCTV, intruder alarms and control systems.

All too complicated?

Running a business is hard enough, if you want some advice on you can fund your business premises, feel free to contact us.

Don't forget the lawyers

What type of business are you (eg a shop, an office or a factory)? It will be easier if the property already has planning permission for your 'use class'. Will you need any new planning permission - for example, to put up business signage? Is your business covered by additional regulations or do you need any licences? For example, if your business processes waste or handles food.

Think about future flexibility

 

Many businesses underestimate how quickly they will outgrow their premises. Going into a serviced office block may allow you to shift from one office to another while keeping the same address. This reduces relocation costs and the disruption of moving. If you initially sublet part of your office, you have the potential to expand in due course.

Decide the type of 'tenure' you require - Lease or buy?

Will you lease or buy? If you need leased premises, how long a lease would you prefer? You'll be surprised with the answer! You will need to determine whether either buying or renting a commercial property is best for your business needs.

A lease gives you more flexibility, but less security

 

With a wide range of business premises which can be leased. most established businesses lease their premises. Leasing gives you security of tenure for the term of the lease, which is generally between three and 15 years.

 

Most leases include rent reviews at fixed periods. In a rising market, your rent may increase considerably. If rents fall, you may be stuck paying above market rates for several years. You may be liable for the rent for the whole period of the lease, even if you vacate the premises early. But you may be able to negotiate a break clause that gives you the option to end the lease early (eg at five-year intervals). Further to this, your business will be effectively shelling out ‘dead money’ for a property you don’t own, meaning you won’t benefit from an increase in the property’s value.

 

Your landlord is responsible for the external maintenance of the building, giving you peace of mind when things go wrong. You may be responsible for internal repair and maintenance work.  You can usually make alterations (with the landlord's consent). But at the end of the lease, you may be liable for putting right any alterations you have made.

 

It's important to look for any restrictions  the lease may include on how you can use the premises, whether you can sublet part of the premises, and so on.

You can buy the premises outright and acquire the freehold
 

Choose to buy a property, and you won’t need to worry about unexpected rent increases imposed by the landlord. And should the property go up in value, your business’ asset value will increase. You may also be eligible to sub-let a portion of your premises to other businesses, helping to generate further income.

Some businesses buy premises when they have spare cash and are looking for a long-term investment. The fact that interest you pay on any commercial mortgage is tax deductible makes the purchase even more affordable.

One of the best features of purchasing your business premises is you can stay in the premises as long as you want. In theory, you can move out when you want, but this will be subject to market conditions and your ability to find a buyer. You can alter and improve the premises as much as you like, to suit the needs of your business (subject to planning permission and building regulations).

If you no longer need the premises for your business, but cannot sell the property, you have the option to become a landlord and lease or license space to other businesses.

Buying your premises can prove an easier investment since many banks favour funding businesses purchasing their own premises and will lend higher ratios than their usually investment criteria. Contact us for more information regarding this. There are risks to the loan - opt for a variable rate commercial mortgage, and your payments could increase overtime thanks to interest rate rises . 

 

If you buy a property, make sure to keep all records as you may be able to claim tax deductions and GST credits for the property or some of the expenses associated with it.
-If you sell commercial premises you may need to pay capital gains tax (CGT) or goods and services tax (GST).

About Just Business Financial Services

At Just Business Financial Services we provide a holistic approach in providing all your financial needs. Having strong affiliations with a wide range of lenders and providers, including the Big Four banks, we can provide our customer with the best service possible.  This puts our specialists in the position to not only find you the best deal, but also the right structure for your business.

 

When it comes to your business' finance, having the right person there by your side is essential to grow your business. Being FBAA accredited, you can trust you are in good hands with Just Business Financial Services.

 

Unlike dealing with the banks, at Just Business Financial Services it is comforting to know you only have to deal with one consultant for all your business financial needs.  We, at Just Business, provide your business with all the finance and insurance support it requires to keep it moving in the right direction.

 

Our approach is 'We take care of your Finances, so that you can take care of your Business'​.

All too complicated?

Running a business is hard enough, if you want some advice on you can fund your business premises, feel free to contact us.

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