The impact of choosing to buy or rent commercially
The question of whether to rent or buy commercial property and in particular, commercial property in London is one that obviously has a tremendous impact on the company’s operations, cash flow and overall finances.
Whilst you may be feverishly scouring the property industry news for ‘insider tips’ on what the market is up to, that’s only one part of the recipe for success.
A pragmatic, much less risky approach is to identify your company’s unique business needs and how well those could be served to rent or buying.
Our checklist of ideas here can give you the advantages and disadvantages of both renting and buying so you can begin to see how they relate to your real-life business.
Why Do Companies Buy?
You control the entire space from the moment the keys are yours.
This gives you the flexibility to decide whether you’d like to make adaptations to the structure, perhaps to incorporate the exact technology your business needs.
When renting a commercial space, generally speaking, you are not allowed to change the major features of the unit.
As more and more businesses are looking to stay modern and up-to-date in order to keep customers coming for more, they will want to have contemporary features.
This might include features such as modern shop fronts and open plan spaces to special touches like automatic sliding doors to make customers feel welcome.
All of which would require permission from the property owner, or even planning permission.
Businesses may also want to include certain machinery or create new dedicated spaces, such as a reception lounge for clients.
You can dictate exactly what happens at all times in the building.
This may include times for site access, although with a good quality rental agreement this is also possible, and you should always check this for any type of commercial property in London.
One downside to buying here though is you probably won’t be able to control who your neighbours will be any more than you would in a rental agreement.
It represents a long-term investment
In the long run, the investment in the property is often going to be more economical than renting, providing you have the stability to commit to the agreements.
So Why Do Companies Still Choose To Rent?
Renting can allow newer businesses space to grow.
This option can often be attractive to smaller businesses, and newer ventures. Instead of needing to secure very substantial levels of financing, it can help you operate until your finances are in the right place to make a confident, stable, and wiser commercial property purchase.
This is particularly true for commercial property in London, where space is at a premium compared to other areas of the UK.
However comprehensively your company researched, there is always an unknown factor to commercial property. Your ‘prime’ area may later reveal itself as sub-optimal, and renting gives you the flexibility to relocate if you need to.
Your Rent Can Be ‘Claimed Against Tax’ Liabilities.
Correctly documented business rental costs are usually an ‘admissible business expense’ for HMRC purposes and so can be included in your companies annual returns.
The amount of rent paid is taken into the calculations made reduce the amount of tax you’ll pay. From sole traders to Limited Companies, this can be a great advantage for cash flow.
Your tax advisor or accountant will be able to give you full details on exactly how much less you’d pay.
Renting allows you the flexibility to move if your needs change.
You may find that your needs change as your business grows or changes, perhaps in quite unexpected ways.
Renting allows you to put your ‘toes in the water’ before later settling on the ideal purchase.
You may be surprised to discover larger companies whose needs are currently simply better met by renting, even for commercial property in London.