South: Why rent your business premises when you can buy?

It’s always been important for businesses to be as efficient as possible and to keep their overheads low, and one of the biggest monthly expenditures is generally the rent on the premises.

But an increasing number of businesses are starting to see the sense in swapping their leasehold agreements for property ownership – and with no less an authority than estate agents Knight Frank seeing huge potential for the South of England outside of London this could be the time to make the great leap.

However, a caveat before we get into the advantages of buying rather than renting is that it’s something to do for the long term. So as long as your business plan extends for 10 years or more it could be well worth considering.

This longer-term planning ties in with one of the key advantages of any property ownership, the potential to see its value gradually increase over time. As with residential property, the South East is the part of the country that has seen some of the most dramatic rises in the past with double digit annual figures not unknown. And, even though the last reported annual increase was a more modest 1.2%, the trend is definitely upwards.

The fact that interest rates are so low, and are also predicted to remain low not just for years, but for decades, is another good reason to consider taking the plunge and choosing to make a monthly commercial mortgage payment instead of paying rent to a landlord. Plus, by taking out a fixed-rate loan and re-mortgaging each time the fixed period comes to an end, you will have the added reassurance of knowing the monthly cost of your premises will be free from the unexpected, and unwanted, surprises of sudden rent increases.

We’ve mentioned planning ahead, and this is where one of the key concerns that some businesses may have about committing to property ownership. There will almost certainly be a need to expand in the future and generally this means moving to larger premises. But, as an alternative, buying premises that have excess capacity for your current needs and letting part of them out is a good solution. Not only will the rental income pay for at least some of the mortgage, when the time comes you will be able to take over sole occupancy of the building.

Owning your own premises has the added advantage is that, subject to planning and building regulations, you will be free to adapt and adjust it to fit in with your requirements. This is something that may be more problematic if you first need to get a landlord’s permission.

The flipside of this, of course, is that it’s also going to be your responsibility to maintain the upkeep of the property and sort out any issues that the landlord would normally have to resolve.

So, while it’s obviously not a black-and-white choice, there are plenty of reasons to choose owning over renting. Now it’s just a question of finding the right property…