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Considerations When Renting Commercial Premises

When you are in the market, looking to rent a commercial property such as a shop or a restaurant, there are several things to keep in mind. It is becoming increasingly common for UK companies and businesses to opt for renting a commercial space rather than purchasing it outright. This trend has grown significantly over the last ten years or so, with businesses increasingly anxious to tie up their capital and commit additional time to managing premises that would in-effect be their very own.

With so many businesses and business owners struggling to know where to start, you should start by making sure that renting is altogether the right option for your business over buying premises. It is important to weigh up your options before looking for somewhere to occupy; particularly if this is to be for the long term.

Premises Location
Arguably one of the most important factors to consider when looking to rent commercial premises is the location. It is advisable to undertake extensive research into the local property market. This will include looking in detail at aspects such as the availability of property and rental value in the area as a whole. On this basis, you should also consider agents and property experts in the local area. For example, if looking to rent a commercial property in Edgware, estate agents in Edgware will be better informed about the local trends than those from outside the local area.

Depending on the function of the property, priorities when choosing the location may vary. For example, if you are running a restaurant or high street shop you will need to ensure that there is significantly high footfall in the area. However, if you need to rent for the purposes of a warehouse or manufacturing premises, you may need somewhere which has good transport links and parking for staff. Similarly, if you are looking for office space you should be looking at premises which will allow staff to commute easily.

How Much Rent Can You Afford?
Obviously, the rent you can afford will affect where and what you can rent. In most cases, the rent for commercial properties is paid on a quarterly basis, i.e. every 3 months. However, it is becoming increasingly popular for landlords to ask for rent on a monthly basis, which can cause problems in some peoples’ eyes in terms of cashflow.

If you have a longer lease arrangement, it may include rent reviews which are likely to occur every three, four or five years. These can alter the amount of rent you are required to pay over time. It is therefore important to note that your rent can go up as well as go down; this is dependent on the terms of the lease.

What About Business Rates?
As well as thinking about rent, you will need to factor in business rates, a tax on non-residential [commercial] buildings in England and Wales. These rates cover premises and properties such as shops, pubs, factories, offices and warehouses and are usually paid for by the residing tenants, i.e. the business renting the space. Typically, business rates tend to add around 40 per cent to the cost of renting the property (according to the Property Data Report 2014.)

Other Things to Consider
As well as the rent and the business rate costs, there are other somewhat smaller factors which should be considered. One of these is energy costs. In the commercial property market, shops are the largest consumers of energy as well as often being the most efficient. Your landlord is required by law to provide you with an Energy Performance Certificate (EPC) which sets out how energy efficient the property is, rated on a scale of A – G.

Other Considerations Include:

  • Moving costs
  • Local authority charges
  • Deposit to secure the property
  • VAT
  • Any renovations: decoration, repairs and ongoing maintenance.
  • Any fees for professional advice on your commercial premises; estate agents and solicitors.

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