As a business owner, there are a number of decisions you are responsible for making every day, from small issues through to larger strategic decisions likely to have a lasting impact on your company and staff. One of these is finding the right space to operate from; should you rent or buy? No matter what type of business you own, securing the right property will be crucial for success and employee satisfaction.
Businesses, especially start-ups, can grow and pivot quickly, so having the ability to be agile can be beneficial. If your team is expanding rapidly and outgrowing the current space, being able to move to bigger premises within a short period of time is critical. Renting for business purposes is therefore popular, but there are also advantages to buying commercial property outright.
Ultimately, the decision is unique to each business and the owner’s objectives. At CVA, we find that clients in retail tend to have different needs to those in a traditional office space, for example.
Do you depend on a brick and mortar shop front? For shops, cafes, restaurants and other retail outlets, the in-store atmosphere heavily influences customer experience and therefore your bottom line.
Despite the prevalence of online shopping, there is no doubt that if you have a physical store the space itself can often determine whether a customer will choose to return or not. We always advise clients to be sure that a space is where they envisage their business for over 10 years, before signing on the dotted line.
Leases expire and for some businesses, having a lack of stability can be concerning. If you have found the perfect location that is accessible for customers or clients, is close to public transport and fits your needs, you may want to have the comfort of knowing that you can stay for as long as you want.
Although commercial leases tend to be a lot longer than residential, once it comes to an end there is no guarantee that you will be able to renew it. You might have spent money customising the space and customers don’t always follow relocating businesses!
Moving may mean revising your business model and finances, so it is worth considering buying the space before automatically going to rent it if stability is your main concern.
Growing your capital
If you buy and subsequently make renovations to improve the area, at the point of sale you would likely benefit from the increase in value. Almost all business owners fit out their space (at least internally) once they move in, whether they sit within retail, industrial or office space. These renovations tend to be costly.
At the end of the leasing period, the landlord is left with the improved property – the way to benefit from this is to own the property yourself!
Buying space for your business can be a major commitment. If you’re unsure whether the premises will be your business’s long-term location, it’s usually worth renting to start with.
As owner of the property, when you decide it no longer suits your needs you will effectively be locked into the space until you find a buyer or renter. This is why most start-ups choose to rent before buying; to allow for time to test the waters with less financial risk.
Deciding whether to buy or rent property for your business can be daunting; it is hard to predict what you will need and can be a significant investment. For those looking for stability, buying could be the best choice and provides a guarantee that you won’t be uprooted once the lease comes to an end. For smaller businesses, renting is usually the popular choice, as owners find their feet and have the flexibility to move if required.
Contact us today on 03 9654 2311 for more advice on commercial property strategy in Melbourne.