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.
Why rent a property?
Renting could be a better option for you and your 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
- 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 on this final point, 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 but also 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 in the case of more people 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 purchase through Stamp Duty Land Tax (SDLT) and at the sale where Capital Gains Tax will apply.
Basic rate taxpayers will pay 10 per cent on commercial property, with 20 per cent being levied on higher rate taxpayers.
The important thing is to check with your property adviser at each step of the process. Professional help will mitigate costs.
Thinking of buying or renting a commercial property? Contact our team today.