New and existing business will often need to consider the decision whether buy or rent commercial premises.

Before a business makes this decision, there are a number of factors that need to be considered.

Dan Smith, director of Newport-based M4 Property Consultants, considers these and outlines their various pros and cons.

However, circumstances can vary and Dan recommends always taken the advice of a chartered surveyor to help you through the process.

Buying commercial premises

Pro’s

Fixed costs – the business owner will have greater certainty of their fixed costs which will be of benefit when making future projections and plans. Allowances would not have to be made for potential future increases in rent etc.

Tax benefits – owning and managing your own business premises can provide tax and expenses deductions.

Additional income – surplus space within the premises can be sublet to generate additional income.

Investment – unlike renting, the company will be investing in the purchase of the premises. If commercial property prices increase, you will benefit from those gains. Property can also provide a valuable asset on the balance sheet.

Cons

Cash-flow – A significant amount of money is required to fund the purchase of a commercial premises. Typically, the business may need to provide a 30 per cent deposit. Consideration needs to be given as to whether this investment can be justified or whether the money would be better spent on new equipment, staff training, etc.

Flexibility – purchasing a commercial property should be a long term commitment. Relocating can prove more difficult if a business owns the building. If the business is growing rapidly or the industry it works in is experiencing radical changes, they need to consider if purchasing is the right option.

Time – It can be a lengthy process to identify and acquire the right commercial premises. This can be eased by employing a chartered surveyor to work on your behalf in the acquisition.

Renting commercial premises

Pro’s

Free-up working capital – renting usually only requires the business/entrepreneur to only pay an initial deposit and then a quarter’s rent in advance. This ensures that available cash can be invested in the development of the business, not the property.

Time - allows the management more time to focus solely on running the business.

Prime location - sometimes, particularly with retail property, renting is the only way to secure a prime location. This may be fundamental to the business success and more important that purchasing a property.

Cons

Variable costs – commercial leases often contain rent reviews which mean the rent could increase. Service charges may also increase. These costs are difficult to control.

Lack of investment - When renting, the rent paid assists the owner to pay their mortgage and provide them a valuable asset, not the business occupying.

Restricted by lease – leases provide a number of restrictions within them. These vary on individual properties. However, opening hours may be restricted, the permitted use within the building may be limited and other restrictions may apply.

There are clearly advantages and disadvantages to both buying and renting commercial property. However, many factors can impact this decision such as an individual business’ requirements, the current and future financial position of the business, the potential for expansion, the state of the local property market and many more. That is why it is crucial to consult with professional advisors including your accountant and your chartered surveyor.

Serviced offices – the small businesses flexible friend?

Over the last five years, there has been a gradual increase in the number of serviced offices available for rent by businesses along the M4 corridor from Chepstow to Newport.

Owned and managed by national and local companies, each has a slightly different pricing policy with varying items included in the rent. Each has their own advantages and disadvantages, depending on what type of business is looking at them. But what are serviced offices and what benefits do serviced offices provide for their tenants?

Serviced offices are a great way for new businesses or SMEs to establish their base, often located at a prominent, easy to find business address, and providing tenants with the flexibility they require to develop their business.

A serviced office is usually provided furnished ie desks, chairs, filing cabinets and phones and is offered on flexible licence terms for as little as a month at a fixed, all inclusive fee. Exactly what’s included in the rent can vary but usually includes rent, business rates, utilities, service charge, building insurance, telephone line and internet connection and a telephone answering service. For some companies, the telephone answering service can save you thousands of pounds each year on staff costs! Additional services such as meeting room hire and secretarial services are usually available at additional cost.

The key advantages to serviced offices compared to traditional lease accommodation are set up costs, flexibility (in terms of length of commitment and amount of space required) and the speed in which occupation can be gained – sometimes within a matter of hours! Serviced offices usually suit start up companies, regional sales advisors, small professional firms or companies with unpredictable growth.

There are more than seven serviced office centres along the M4 corridor in south east Wales. Local commercial agents will have an understanding of each of the available centres and be able to compare each offering, depending on the individual needs of the occupier. They will also know which operator is offering the most competitive deals at any given time.

Are serviced offices a flexible friend for small businesses? – in my opinion, for a lot of small businesses the answer is yes.