In the dynamic world of business, finding the right space for your commercial venture is a crucial step toward success. Whether you are a budding entrepreneur or an established business owner looking to expand, renting a commercial property requires careful consideration and strategic planning. In this guide, we will navigate through the essential steps and factors to ensure a smooth and informed process when renting a commercial property.
Searching for commercial property to lease? Whether you’re venturing into commercial property rental for the first time or already have some expertise, it remains a significant commitment.
We’ve compiled this useful manual on leasing commercial property to assist you in confidently navigating through the entire process.
Whether you’re searching for the perfect property or need guidance on the essential queries to pose to the landlord, we’ve got all your needs addressed.
Guide on Leasing Commercial Real Estate
Discover the perfect rental space for your business
The key is in the location!
Selecting the right location is a critical aspect when considering new premises. It is essential to conduct a comprehensive analysis of the local property market dynamics, taking into account factors such as property availability, tenant demand, and rental values.
For businesses like restaurants, cafes, or shops, ensuring high footfall is crucial. Distribution warehouses benefit from proximity to good transport links, while office spaces or serviced offices should be located where staff can easily commute.
Additionally, exploring regional incentives and initiatives, such as Business Improvement Districts (BIDs), Enterprise Zones, and Local Enterprise Partnerships (LEPs), can provide valuable insights.
To streamline your search, you can explore commercial properties for rent and connect with local commercial estate agents through platforms like Zoopla in your area.
Which category of commercial real estate offers the most advantages?
When contemplating the leasing of commercial property, a myriad of inquiries must be addressed. Fundamental considerations include determining the required amount and type of space, while also contemplating potential changes in the foreseeable future. Selecting the appropriate commercial property for rent is pivotal, as it can enhance business profitability and operational efficiency.
Factors to evaluate encompass the on-site workforce size, operational processes, and necessary machinery. Additionally, forward-thinking is essential. If business expansion is anticipated, assessing the need for additional space or contemplating a future relocation is crucial.
Adopting space-saving measures, such as an open-plan layout or hot desking, may prove beneficial for optimizing business space. Verifying that the chosen commercial property has the requisite planning permission for the intended business activities is advisable. Utilizing the Planning Portal, a comprehensive list of use classes for England and Wales can aid in this verification.
If modifications to the commercial property are envisaged, securing landlord consent is a necessary step. Various other considerations demand attention during the inspection of commercial properties for rent, including:
- Transportation links: airports, trains, buses, and roads
- Congestion charges
- Parking facilities and restrictions
- Delivery facilities and restrictions
- Proximity to customers, clients, and staff
- The overall impression on staff and clients
- Local amenities such as cafes and shops for employees
- Staff facilities
- Equipment and furniture
- Broadband coverage
Moreover, a thorough examination of the commercial property’s condition is imperative, akin to assessing a residential rental. Vigilance for issues like dampness, structural cracks, plumbing concerns, and other defects is essential.
The expense associated with leasing commercial space
Determining affordable rent is a crucial consideration when exploring available commercial properties. Rental expenses often constitute a significant portion of the overall costs associated with leasing commercial spaces.
Typically, rent is paid in advance on a quarterly basis, with due dates falling on March 25, June 24, September 29, and December 25. While this remains common, an increasing number of landlords now permit monthly rent payments. In addition to rent, any service charges or insurance fees are generally invoiced concurrently. In cases where your business is relatively young or small, landlords might request a rent guarantee and assurances for other obligations.
Leases, especially if they are lengthy, may incorporate rent reviews every three, four, or five years, potentially leading to adjustments in the rental amount over time. It’s crucial to recognize that rent can fluctuate, either increasing or decreasing, depending on the lease terms.
To make informed decisions, it’s recommended to investigate prevailing rental trends and forecasts before committing. Seeking guidance from a commercial estate agent is also advisable.
However, aside from rent, there are additional costs associated with leasing commercial properties to consider.
What are the anticipated costs of business rates?
To estimate your business expenses, it’s essential to consider business rates, a non-residential property tax applicable in England and Wales (distinct regulations apply in Scotland and Northern Ireland). Business rates encompass various establishments like shops, offices, pubs, warehouses, and factories, generally borne by tenants.
The calculation of business rates hinges on two primary factors: the rateable value, essentially the open market rental value of the commercial property, and the uniform business rate (UBR). Revaluations, occurring approximately every five years, adjust rates to align with property market changes. The latest revaluation in England and Wales took effect on April 1, 2017, utilizing rateable values from April 1, 2015.
Exemptions, such as small business relief, can be sought to mitigate costs. Business rates bills from the local council are typically dispatched in February or March for the upcoming tax year.
Additionally, supplementary charges may apply alongside the UBR, such as the Crossrail business rates supplement in London, aimed at financing the high-speed rail link’s construction. Simultaneously, BID levies, based on rateable value, are distinct from standard business rates liabilities.
Additional factors to take into account.
Typically, tenants are anticipated to bear the responsibility for either all or a portion of the service charges associated with the leased commercial property. These service charges commonly encompass the upkeep of shared areas within the commercial property, as well as a contribution towards any necessary repair or redecoration. In cases where the landlord assumes responsibility for insurance, tenants may also be obliged to share the associated costs.
Energy stands out as another expense in leasing commercial properties, and it is expected to be a significant factor. Among commercial properties, shops emerge as the foremost consumers of energy. Nevertheless, they are generally more efficient, as stated by a government source in the 2014 Property Data Report. Your landlord is obligated to furnish you with an Energy Performance Certificate (EPC), offering insights into the energy efficiency of the commercial property.
Consider incorporating the following elements into your budget
Consultation fees for professional guidance from commercial estate agents and solicitors.
Local authority charges related to the commercial property.
A deposit is required to secure the chosen commercial property.
Value Added Tax (VAT) applicable to some buildings.
Stamp Duty Land Tax, applicable to commercial properties exceeding a specific valuation threshold and calculated based on the premium and rent.
Costs associated with decoration, repairs, and ongoing maintenance of the property.
Explore the possibility of capital allowances, a type of tax relief that may be claimed if you purchase assets for business use, covering associated costs.
Inquiries to Make When Leasing a Commercial Property
Understanding the implications of signing a tenancy agreement or license for a commercial property rental is crucial. To guide you through this process, consider asking the following essential questions when engaging with the landlord:
- What is the monthly rent, and are there any rent-free periods available?
- How and when will the rent be subject to review?
- What are the business rates and their associated costs?
- Besides rent, what additional expenses should I be prepared to cover, such as service and maintenance charges?
- When and how are utility bills and other related costs expected to be paid?
- What is the duration of the lease?
- Are there any break clauses in the agreement, and if so, when do they apply?
- Is it possible to assign or sublet the property?
- What are my primary responsibilities as a tenant?
- What property services are included in the rental arrangement?
- Is there an option to renew the lease when it expires?