Buying Your First Commercial Property: The Definitive Guide


Choosing the right home for your small business is one of the most exciting things a business owner can do, but it can be daunting. This key decision will have such an effect on the culture of your company and its perception by others that getting it right is a big responsibility. After all, if you’re looking to offer luxury spa treatments you might not want to be in a draughty unit on an out-of-the-way industrial estate! This definitive guide to buying commercial property will help you with this step in turning your business dreams into reality.

Full of insights and practical advice, this guide is essential reading for anyone buying commercial property for the first time. We’ll weigh up the pros and cons of buying and renting; give you top tips on finding the perfect property; show you where to get professional help; highlight some of the costs you’ll encounter, and so much more.

This guide is the perfect starting point for finding the right base for your business, so let’s dive straight in.


How buying commercial property could benefit your business
Is renting better for you?
How to find the best property for your business
How to get the best out of your surveyor
Making sure everything checks out
Keeping your costs under control
Tips and tricks for making a successful offer

How buying commercial property could benefit your business

Just as there’s always debate about buying or renting your home, so there are discussions about buying or renting your business premises. While the hefty deposit might seem expensive compared to the low-start-up costs of renting, there are many advantages to buying commercial property.

Buying commercial property could give you a good return on your investment

Depending on the property, if the market improves over the long term or you develop wisely, you could achieve an excellent return on your investment. For example, if you fit out a standard property with facilities that businesses usually look for, such as air conditioning, meeting rooms or a kitchen, then you’re more likely to make money if you decide to sell or let the property later. Who knows, this first purchase could be the start of a lucrative future in property investment!

You could gain more flexibility for your business

Owning the property should give you greater flexibility to use it in a manner that’s most appropriate to your business. This means you can decorate and make repairs and renovations as you wish. You could even completely redesign the premises as your business expands.

However, before you start knocking out walls be careful of making too many structural changes. Remember you don’t want to put off any future purchasers or tenants. Plus, you need to check the building regulations and rules associated with the building. For instance, you may have to obtain consent for works on listed properties. Check with your local council before starting any works.

If financial circumstances change, you could also let part of the premises to another business (if your lender agrees), remortgage to provide funding, or even arrange a sale and leaseback deal to free up capital.

It can provide more financial certainty for your business

Renting property from a landlord means that you are, to some extent, at their mercy. If they decide to put up the rent or start redevelopments it can put you in a tricky position. Do you move or do you stay? Both of which might require you to find extra money. Buying commercial property for your business to occupy could protect you from unwelcome financial surprises along the way.

It could reduce your tax bill

If you’ve used a mortgage to buy commercial property then the interest payments on the loan are tax deductible. This is a popular way to reduce your annual tax costs. Also, spending on building fixtures such as fitted kitchens or bathrooms, or integral fixtures such as heating, air conditioning and lifts may also qualify for plant and machinery allowances when it comes to your tax return.
A row of terrace housing with a to let sign in the front garden of one

Is renting better for you?

While this may all sound tempting, it’s important to carefully consider all the possible disadvantages and whether buying commercial property is really for you.

Can you afford to tie-up so much cash?

Whether you buy the property outright or with a mortgage, buying a commercial property is a significant investment. The cash you use to buy will mean there’s less for you to invest in growing your business. Also, if property values drop you’ll be losing capital. And what happens if interest rates rise? If you can’t pay then you risk losing the whole property.

Do you understand the commercial property market?

The commercial property market can be unpredictable. If you buy an unsuitable property in an unsuitable location you could end up losing money on it and jeopardising your business. Researching the commercial property market and understanding the risks involved are vital when it comes to such an important business investment.

From magazines like Estates Gazette and Property Week to big real estate companies like CBRE there’s huge amounts of freely available research and insight out there to help get you started.

Do you expect to move?

Planning for the future is an important part of business ownership. If the needs of the business change (for example, you hire a lot of extra staff but haven’t got the space to accommodate them) then owning the property might make it harder to adapt – creating a big impact on your business’s ability to operate effectively.

Are you happy to take on the responsibility?

Once you own your own property, you’ll be the one responsible for the maintenance, repairs and health and safety considerations of the building. This can involve significant extra work and expense. Just as you do when you buy a home, buying commercial property means you’ll incur long-term upkeep and costs. Budget ahead to avoid any surprises further down the line.

Ask yourself whether your business is ready for this. The short-term costs of commercial property are often more than the cost of renting. This might be too much for a start-up to take on. It might be worth waiting until your business is reasonably well-established with a solid growth potential before taking on such responsibility.

So, if you’ve weighed up the pros and cons and are certain that buying commercial property is for you, then what do you need to consider next?

How to find the best property for your business

Finding the right premises to suit your business is a major decision. The perfect location is vital for attracting customers and the best employees, while also getting ahead of the competition. The property itself can also have a big impact in terms of the facilities on offer.

It’s useful to take the long-term property price predictions for your area into consideration. Are there any planned infrastructure changes such as a new rail link or other developments which will impact future property prices? Be careful of getting carried away and taking an over-optimistic view – overextending can be a common pitfall. Remember, the time spent on researching the best commercial property to buy is never time wasted.

A great place to start your search for available commercial properties is through online portals like Rightmove, Zoopla and PrimeLocation. You can also speak to estate agents who deal with commercial property sales in your area. Don’t forget to ask around your local business contacts and check newspaper or business listings, you never know when a great deal could come your way.


There are many different considerations to take into account when it comes to location. For example, if you’re involved in retail or providing a service like hairdressing, you’ll obviously want a decent location with high footfall for a steady flow of customers. However, these more popular locations can often come at a higher cost. So, you could balance this by moving to a nearby but less busy location. If you do though you’ll need to be confident with your marketing strategies to encourage customers to make that extra effort to find you.

Even if you’re looking to buy other types of site such as a unit on an industrial estate or a well-equipped office in a business park, the right location is still vital. Out of town might be cheaper with better parking and motorway links. But where do your staff commute from and how useful is it for nearby suppliers and deliveries? And do you want exclusivity in the area or are you happy to be close to competitors to attract customers? The list of possibilities goes on…


Working out how big your business premises need to be can be tricky. While it might not be cost effective to have too much space, what happens if business takes off and you need to expand? You don’t want to grow out of your premises too quickly!

Different businesses will require different amounts of space to comfortably house employees. For example, a call centre might need less space per employee, while a professional services firm might need more to allow for consultation space and meeting rooms for clients. Bear in mind there are health and safety regulations in place to ensure that workers have enough space at work. There’s more information on the guidelines on the HSE website.

Really think about the space you truly need. For example, many companies use hot-desking or flexible working to reduce the amount of space needed if many staff are only in the office on certain days or at certain times.

And don’t forget additional space requirements. Do you really need a meeting room? And if you have set aside a lot of space for archiving or storage could that be shifted to a cheaper off-site storage facility. Before you commit to any space make sure you’ve considered all of these options.


Having an accurate list of essential services needed for your business is useful. The presence of basic services like power, plumbing, drainage, heating, phone and internet all need to be checked. For example, are there sufficient power points and phone sockets for your needs, or do you need to add more?

Some businesses also need additional services, like special arrangements for a gas supply, three-phase power, or ventilation and air conditioning for IT equipment. Some businesses may also need the property to have the capacity to store or dispose of toxic waste.

With this list you’ll be able to focus on business premises that either have these facilities already, or premises where you’re able to set them up.

When buying commercial property take into account car parking requirements. If they’re substantial then an out-of-town location might be better. Staff parking is useful for those commuting to work by car. It can also make a good impression on clients.


An important consideration is what type of business you run and whether the property has planning permission for that ‘use class’. There are a whole range of different use classes and if the building is currently used for a different purpose (for example, it’s currently a pub, but you want it for a hair salon), you’re likely to need permission to change the use.

Also bear in mind that special permissions and licences may be required for certain business activities such as hot food takeaways or drinking establishments. Find out now whether this is possible at the site before you sign on the dotted line.

And if your business plans depend on making alterations or extensions to the building then investigate whether you’re likely to get planning permission. Leave nothing to chance when it comes to having the right paperwork. The Planning Portal has lots of information on these tricky planning issues.

Security and access

All business premises must be capable of being properly secured in order to protect them from any damage. However, some businesses may also require specific security measures, for example if they have particularly valuable stock or equipment on site.

From round-the-clock security and CCTV cameras to a simple set of sturdy door and window locks, you’ll want to consider whether adequate security measures are already in place or whether there’s the possibility of adding them. A listed building in a conservation area could be more difficult to secure than a modern office block.

When it comes to considering access to the premises, will you need to gain entry 24/7? Does it matter what floor you are on or how large the entrances need to be?

If you’re considering space in a shared block, you might need to consider the other occupiers' needs, too.

After you’ve found the property that meets your list of specific requirements, then it’s time to take action.
A person installing CCTV cameras

How to get the best out of your surveyor

For residential property buyers a chartered surveyor is often only used when carrying out a property survey as part of a mortgage application. However, many business owners looking to make a significant investment in buying commercial property will hire a surveyor to help with the whole process and protect their interests.

A surveyor’s role could include:

●       Advising you on the state of the local commercial property market and what’s available.
●       Searching for suitable properties and shortlisting (great for those already busy with a growing business).
●       Guiding you on the appropriate value of premises
●       Assessing a property's condition.
●       Assessing a property’s potential investment value.
●       Performing a full survey (not just a valuation) to make sure no problems have been overlooked.
●       Negotiating a price on your behalf taking commercial factors into account.

It’s entirely up to you which services you choose. However, investing in the cost of a full survey is a business essential as it will:

●       Independently check the actual dimensions of the premises.
●       Ensure that the building complies with building regulations.
●       Estimate the cost of any building repairs.
●       Check the condition of services, such as lifts or air conditioning equipment.
●       Alert you to any dangerous materials, such as asbestos, which may need to be removed.

Never rely on a valuation survey commissioned by your bank. A valuation survey is a basic inspection which just tells the bank whether the property is worth lending against. Also, if it misses any faults you usually have no comeback, as it was the bank and not you that was the surveyor's client.

The Royal Institute of Chartered Surveyors (RICS) ensures that surveyors work to the very highest professional standards. They have a useful directory on their website in order to help you find the right surveyor for your project. It’s also useful to speak with other local business people for recommendations. After all you’ll want the most experienced and reliable professional working for you.

That said it’s still important to check who will be doing the survey work, what type of survey they recommend for the property and that the survey covers all your areas of concern. After all, the surveyor won’t be held responsible for things they didn’t agree to check.

Finally, make sure the surveyor has professional indemnity insurance in case of any problems further down the line. And if you are applying for a mortgage then find out if the surveyor's report will be acceptable to the bank. This may help reduce your mortgage set-up fees.

Making sure everything checks out

Another key professional you’ll need to get on board is a conveyancing solicitor. They’ll carry out a whole series of property searches and other legal 'due diligence' for you, and make sure the purchase goes ahead as smoothly as possible.

Due diligence is the process of checking, double checking and confirming a lot of important information. If it’s not done right then you could have a whole heap of legal trouble later. That’s why it’s so important to get a professional who knows what they’re doing. Thorough checks can take several weeks so you’ll need to be patient.

It essentially involves your legal representatives getting the answers to six key questions.

1.         Is the property actually owned by the seller?

We’ve all heard horror stories of people paying someone a lot of money for something the purported seller doesn’t in fact own. And even if they do own it, they might not have the right to sell it to you.

2.         Would there be any restrictions on your use of the property?

Once you buy the property you might hope that you can use or alter it in any way you please. However, that isn’t necessarily the case.

There could be restrictions contained on the property’s deeds or that form part of the property’s planning consent. Such restrictions are very common where the property is a listed building or is located in a conservation area.

Examples of such restrictions include:

●       Restricting occupation of the property to a certain trade or professions.
●       Limiting trading hours, vehicle access, or use in order to protect the rights of local residents.
●       The rights of others over the property which might affect its use. For example, a neighbouring property owner might have the right to pass through part of your land.
●       Preventing owners from making certain alterations or displaying an external sign on the property.

3.         Is the property likely to be affected by any current or future planning decisions?

There are a whole host of ways that planning decisions could affect the value and use of your commercial property. Your solicitor will check with the local authority to see whether there are any planned building works that could affect your building. Such as changes to the highway system, new parking restrictions, or other building developments in the vicinity.

Importantly, the search will also highlight not only where consent has been given but also where it has been refused. Either of these could radically affect the property’s current or future value.

4.         Has the property got all the necessary paperwork?

There may have been a whole variety of works performed on the property that your solicitor will want to see paperwork for. For example, have all building works been done to the correct standard and been approved? Are there any warranties for damp-proofing or pest control work that has been carried out recently?

If there are, how long are they for and are they transferable. You’ll want to know when boilers or air conditioning units were last serviced and if they are still under warranty. Once the property is yours you’ll be responsible for the building and everything and everyone in it.

5.         Are there any problems with the premises?

For example, an environmental search may disclose that there’s a risk the land is contaminated or it’s on a floodplain. Or there may have been past problems with neighbouring owners, such as boundary disputes or noise complaints. These are all matters worth knowing before you sign on the dotted line.

6.         What fixtures and fittings are included in the sale?

Your solicitor will check what equipment is included in the sale and whether it is actually owned by the seller and not part of a hire purchase or leasing agreement. For example, if you’re a restaurant you don’t want someone taking back that top-of-the-range cooker in the kitchen because the payments have stopped!

Once due diligence is completed, your solicitor can then take you through exchange of contracts with the seller. After exchange, the purchase is binding on both of you and a deposit is normally payable. You pay the rest of the money (plus stamp duty and other fees) on the agreed completion date.
A surveyor jumping in the air holding a rolled up sheet of paper in-front of a property

Keeping your costs under control

Buying commercial property is not for the faint-hearted and there are significant costs involved. Unless you’ve got a large amount of spare cash, the first on the list must be the costs of taking out a commercial mortgage.

There are two main costs connected with this. The first is the interest rate you’ll pay to the lender. The lower the interest rate the lower your monthly payments will be. You’ll need to choose between variable and fixed-rate options. The benefit of a fixed rate is that you’ll always know your monthly outgoings, the drawback being that you won’t benefit when interest rates drop.

The second major cost is the lender’s arrangement fee. Most lenders charge a fee of between 1-2% of the loan amount. Many lenders can add this fee onto the loan amount.

In addition to these costs, you will need to find a hefty deposit – many lenders require between 20% and 30% as a deposit.
Although these costs are substantial, there are yet others to be aware of.

These include:
●       Stamp duty land tax (SDLT) – This is a self-assessed, compulsory tax payable by buyers of commercial property based on the value of the property. You pay 0% on the first £150,000, 2 per cent on the next £100,000 and 5 per cent on the remainder of the purchase price
●       Surveyor’s and legal fees – Those useful professionals we’ve already talked about need to get paid. The level of fees often depends on the value of the property and what other services they performed. These fees can range from hundreds to several thousand pounds.
●       Broker fees – If you choose to arrange your mortgage through a broker then they might charge a fee. This can range from a small fixed fee to 1-2 % of the loan amount.

Four easy steps to calculate business rates

While they aren’t an immediate cost of buying commercial property, business rates are something to be aware of. As once you occupy the property, you’ll be liable for them and they can be substantial.

Business rates are charged on almost all businesses that occupy non-domestic or commercial properties. It’s an annual bill based on the ‘rateable value’ of the property.

Knowing how to calculate your business rates yourself is a useful way to check whether you’re paying the right amount. It also lets you plan your first financial year in a new property that you don’t yet know the business rates of. It’s also useful when considering a property you’re thinking of moving into.

Calculate business rates with these four easy steps:

  1. Use the property postcode or address to search for its rateable value using this government search tool.
  2. Then use this table to find the correct ‘multiplier’ for the size of your business and location.
  3. Now multiply your rateable value by your multiplier to find out how much you’ll pay.
  4. Take away any business rate relief you’re entitled to.

A calculator next to a sheet of accounting figures

Tips and tricks for making a successful offer

Just like with residential sales, many small business owners will be dealing with negotiations over the price themselves. So here are some tips and tricks to making that perfect property yours at a price that’s right.

A conditional offer is best made in writing rather than verbally and you need to make it perfectly clear exactly what conditions the offer relies on.
Common conditions include:

●       The results of a successful survey.
●       Planning permission or other licence approvals.
●       Confirmation that the previous occupant has moved out.
●       Contract conditions and property searches.
●       Mortgage being arranged.

When it comes to the offer price then you’ll probably want to make an offer below the asking price, and below the maximum you can afford.

This will give you vital wriggle room when it comes to negotiations. And you must be ready to wriggle – it’s an important part of the process of getting the best deal for your business.

Useful tactics include:

●       Finding examples of similar properties which are being sold for less.
●       Getting quotes for any repairs or alterations you need to make.
●       Listing problems with the property, such as condition or lack of main services.

It might be worth looking into whether you need to negotiate a 'lockout agreement'. This is a common way to prevent the seller from negotiating with other potential buyers or accepting other offers. If you don’t do this, the seller might keep looking for a better offer from someone else.

After all, everything remains negotiable until the moment you exchange contracts. Remember, they’ll be looking for the best deal for their business, too!

So that’s our definitive guide to buying your first commercial property.