How to Find the Right Property
Finding the right property for your business is one of the biggest challenges you are likely to face. Many businesses begin at home and there are plenty of examples of famous entrepreneurs who started up on their kitchen table. But at some point you may need to have your own business premises.
So what are your options?
- Buy a property (with or without a mortgage): For commercial mortgages you can find out more in our Guide to Commercial Mortgages factsheet.
- Rent a commercial property as a tenant: We recommend that you read all of our How To Guides on the subject. You can find a list here together with a flowchart with all the most frequently asked questions (“FAQs”)
- Try a more flexible solution, like shared office space, managed work space, or even a “business incubator” if one is available. For renting you can find out more in our Guide to Renting Business Premises article, including more about flexible solutions.
Setting your budget
The most important thing to consider will probably be your budget. Will you be able to pay the mortgage (or rent) and all of the other running costs? What is your total budget? Bear in mind as well the purchase or rental cost you need to budget for stamp duty, legal and survey costs, alterations, fitting out and decoration.
You will also need to work out how long you need the property for. If it is a short-term project, renting will be much cheaper than buying. If your idea is untested a short tester period will allow you to gauge how long a project could run for. If you will need it for the longer term, buying is an option, but you will need to factor in different costs at different points in the journey.
You may also have to make alterations to meet building, health and safety and fire regulations. Please see our How to Guide “Understanding Premises Costs” for more information.
Finding the right location for your business
Just like when you are looking for a home of your own, the first thing to consider is location, location, location.
For some businesses, location may not be very important. Some storage firms, for example, may be able to set up almost anywhere. But most businesses are not so flexible and location will be very important.
Property location has a big effect on cost. But cost is only one of the factors to consider when choosing a location.
Here are some other important points to consider:
- Access: think about how easy access is for customers and staff. Does it have disabled access? How much footfall (ie passing trade) are you likely to get? What is the parking like? Is the property near to public transport? Are there congestion charges or delivery restrictions that could cause problems for you or your suppliers?
- What are the local amenities like? Are there banks, cafes, shops, public transport and public parking nearby? These all make it easier for you to attract and keep employees. The same applies for customers and suppliers.
- Is the general image of the area right for your business? Some areas are well known for certain types of business, eg Harley Street for doctors, Hatton Garden for jewellery. Is the area known for what you intend to do? How will your business fit in?
- Does the area feel safe and appropriate for your use? Is there good lighting, indoors and out, good links to other areas? Who are your target audience – what will they need to feel safe?
- Is it an up and coming area? Or are things on a downturn? Are there any big building projects going on or planned locally that may have an impact on you in the future?
- How much are the business rates? These are a fixed cost based on the property. They don’t reflect on your turnover or profits.
- What are the local authority charges for services such as waste collection? These can add greatly to the ongoing costs of locating to a particular area.
- What is the level and demographics of the passing trade? “Demographics” means how the local population is made up. Is it younger or older? Are there lots of families, or is it made up of younger people – students, renters, young professionals? Are the locals all older and retired people? This can have a big impact on the chances of success for most types of business.
- Are there competitors nearby that could have an impact on your sales, or poach your staff?
- Are there any planning restrictions on what can be done in this area?
A crucial factor to consider when choosing a workspace is what planning classification will you need? Just because the lease says you can use a property for a certain purpose does NOT automatically mean the property has the right planning use class.
Commercial property in the UK is based around a number of classifications. These restrict what can be done on and from the premises. This is for a number of reasons, including limiting disturbance to neighbouring premises, and creating a balance between homes and businesses.
There are some twenty different categories from A1 through to F2. The full list includes:
- Class B2: general industrial use
- Class B8: storage or distribution
- Class C1: hotels
- Class C2: residential institutions
- Class C2a: secure residential institutions
- Class C3: dwelling houses
- Class C4: houses in multiple occupation
- Class E(a) Display or retail sale of goods, other than hot food
- Class E(b) Sale of food and drink for consumption (mostly) on the premises
- Class E(c) Provision of:
- (i) Financial services,
- (ii) Professional services (other than health or medical services), or
- (iii) Other appropriate services in a commercial, business or service locality
- Class E(d) Indoor sport, recreation or fitness (not involving motorised vehicles or firearms or use as a swimming pool or skating rink,)
- Class E(e) Provision of medical or health services (except the use of premises attached to the residence of the consultant or practitioner)
- Class E(f) Creche, day nursery or day centre (not including a residential use)
- Class E(g) Uses which can be carried out in a residential area without detriment to its amenity:
- Class E(g)(i) Offices to carry out any operational or administrative functions,
- Class E(g)(ii) Research and development of products or processes
- Class E(g)(iii) Industrial processes
- Class F1 Learning and non-residential institutions – Use (not including residential use) defined in 7 parts:
- F1(a) Provision of education
- F1(b) Display of works of art (otherwise than for sale or hire)
- F1(c) Museums
- F1(d) Public libraries or public reading rooms
- F1(e) Public halls or exhibition halls
- F1(f) Public worship or religious instruction (or in connection with such use)
- F1(g) Law courts
- Class F2 Local community – Use as defined in 4 parts:
- F2(a) Shops (mostly) selling essential goods, including food, where the shop’s premises do not exceed 280 square metres and there is no other such facility within 1000 metres
- F2(b) Halls or meeting places for the principal use of the local community
- F2(c) Areas or places for outdoor sport or recreation (not involving motorised vehicles or firearms)
- F2(d) Indoor or outdoor swimming pools or skating rinks
- Sui Generis: these are uses that don’t fall in any particular use class and include theatres, scrap yards, petrol stations, nightclubs, launderettes, dry cleaners, taxi businesses, and various other uses.
The classifications changed and were expanded in 2020, meaning leases may not be up to date, or may include a more generic “business” use.
Planning permission and classifications are granted by the local authority where your business is based. You can apply to the local authority for a change of use if necessary.
Where a property falls into multiple classes it will be classed as “sui generis”. However, this only applies where it is a genuine multiple use. Often there is a “feeder” use e.g. if a museum has an office attached then the office is ‘ancillary’ to the museum, it wouldn’t exist without the museum. Therefore, the office is Use Class F1 along with the museum. The Office is not in Use Class E.
For planning issues, we recommend that you speak to the local authority and take professional advice. In some cases you will need to pay for this service.
What do you need from the premises?
Alongside deciding on where to locate, you should draw up a list of what you need from your premises. You may need to revise this “wish list” to make it fit your budget. You may also have to trade off some aspects of location to fit with what you want to do. Consider what size and layout you need:
You have to provide enough space to meet your legal obligations both to your employees and your customers. This is the case whether you rent or buy. Eleven cubic metres per employee is the minimum. This may be insufficient depending on the layout, the contents, and the nature of the work. You can view the regulations in full here.
Think about the building itself. Are there any special structural requirements such as high ceilings or heavy load bearing floors that you need?
What facilities do you need for employees and visitors such as toilets, disabled access, kitchen and dining area?
What utilities will you need? These will include power and drainage, and any special requirements such as three-phase electricity.
What options (if any) are there to expand or extend the facilities as your business grows?
Are there any restrictions on times when deliveries are allowed? What are the restrictions on noise and pollution levels, and how you or your customers dispose of waste?
Understanding your responsibilities
Deciding to take on premises is a big step for your business. It will mean you have some additional responsibilities:
Health and Safety
The first of these is of course health and safety. According to the Government’s Health and Safety Executive: ‘Managing health and safety doesn’t have to be complicated, costly or time-consuming. In fact, it’s easier than you think.’
If you have fewer than five employees you don’t have to have a written health and safety policy – although it would still be a good idea, and would impress both your insurer and any lenders you want to borrow from. The risks themselves won’t go away just because your business is small and the work you do seems straight forward.
You should have a health and safety policy that everyone working for you understands and follows. Check out Gov.uk for policy templates that you can use to base your policy on, including a section on risk assessments.
The way you operate your business premises will also have an impact on the environment. There are an increasing number of regulations that you should be aware of. In particular, you need to be aware of regulations about air quality, water quality, waste, chemicals, and spillages. Some industries will also need a permit to operate. You can find out about the environmental management areas that might affect operations at your premises right here. And check here to find out if you need a permit to operate.
You will need to ensure that your insurance covers your premises, employees and any visitors to your premises including customers.
Employers’ liability insurance can be purchased through insurers, brokers or trade associations. You may find that it comes as part of an insurance package designed to cover a range of business needs.
Whatever form it takes, your policy must cover you for at least £5 million and be provided by an insurer or insurance company that is authorised by the Financial Conduct Authority.
Business continuity and disaster recovery
Take some time out to think about what events could disrupt your business. The recent coronavirus public health emergency has shown just how important that is. This type of problem could be losing access to the office, staff shortages, loss of your website server, transport network disruption, or the failure of a vital piece of machinery.
You need to assess the impact of ANY or ALL of these events. Then come up with a simple plan so you can keep going and most importantly, try to keep the cash flowing. You can find more information on this subject from the Business Continuity Institute.
Disaster recovery and business continuity are closely related. The difference lies in their scope. Business continuity covers the whole business, whereas disaster recovery refers to security planning for specific events. Often key IT infrastructure is covered by a disaster recovery plan, to safeguard your operations if your IT is cut off or not available.
Are you reading this page as part of our Guide for Opening, Running and Growing a Cultural or Community Space? Have a look at The Landlord and Tenant Relationship next.
DISCLAIMER This information is meant as a starting point only. While all reasonable efforts have been made, the publisher makes no warranties that the information is accurate and up-to-date and will not be responsible for any errors or omissions in the information nor any consequences of any errors or omissions. Professional advice should be sought where appropriate.
Understanding Premises Costs
A guide to premises costs for cultural organisations.
Basic Business Case Template
Template for cultural organisations to make a case for new premises.
Signing and Negotiating a Lease
Considerations for cultural organisations when negotiating a lease.