Commercial property – choosing the right location

28 June 2015

In our last contribution to the Company Rescue blog, we looked at initial considerations for buying the right commercial property. Here, we will examine the next crucial factor: location.

Choosing the right location for your commercial premises is really a case of striking the balance between cost and convenience. Unfortunately, the more accessible your business is for customers, staff and suppliers, the more expensive it is likely to be.

Factors to consider

Accessibility

Reliable public transport links make life easier for both customers and staff and are very important for almost all businesses. Similarly, it is important that your suppliers are able to access your premises easily. Consider how often you will be receiving and sending goods, particularly if you are thinking of setting up in a congestion zone (see below).

Amenities and surroundings

Your staff will be far happier if they work in an area with good local amenities such as bars, shops, restaurants and recreational facilities. This may be similarly beneficial if you are likely to receive many clients at your place of work.

You may also find that your surrounding area affects the perception of your business, both by staff and potential customers.

Business rates and service charges

Business rates are linked to your property value, and a higher rates bill is often unavoidable if you need to buy in a more expensive area. But you should also look into how much your local authority will charge for ongoing services such as commercial waste collection, as these costs can have a significant impact on your profits.

Congestion charges

The impact that congestion charges can have on business performance is often hotly debated. Eighteen months after the introduction of the London congestion charge in 2003, a survey conducted by the London Chamber of Commerce and Industry (LCCI) showed that 84% of businesses had reported reduced takings year on year, and 63% of businesses had reported a loss of customers ¹. 

  

Transport for London (TFL), on the other hand, claims that trends in VAT registration, business rate valuation appeals and commercial real estate prices do not suggest that the charge has had a deleterious effect on local trade. They in fact claim that the congestion charge has been beneficial for businesses in terms of working environment and ease of travel ².

Local competitors

For some types of business, being located near to too many competitors can severely impact trade. On the other hand, certain businesses tend to attract customers who will shop around before deciding on a purchase, and can actually benefit from being near a handful of similar businesses because of this (estate and letting agents are good examples).

Passing trade

Some businesses rely heavily on ‘passing trade’; that is, trade conducted as a result of a casual encounter, where the client did not initially intend to purchase the goods or services.

Many shops are dependent upon passing trade, and will need to be located on high streets and in other areas where their window displays can draw in potential customers. This is not always true, though; some niche shops, such as independent or second-hand book stores, can enjoy repeat business from collectors, enthusiasts and students, and may be able to trade in less busy areas.

Planning law

You might need to alter your chosen property in order to render it suitable for your business needs. Depending on the usage class of the premises, you might require permission from the local council to do so – so always be sure to check for planning restrictions before you make a purchase.

Find out more about planning law at the GOV.UK planning portal.

Summary

Again, choosing a commercial property is all about balance, as there are pros and cons to every option. The benefits of being in a city centre location can be offset by noise pollution, congestion and cost, whilst a tranquil rural environment might be more difficult for customers, employees and suppliers to get to.

It is often wise to consider what is absolutely crucial for your business success before figuring out where you can stand to make compromises; this way, choosing the perfect location for your premises can become significantly easier.

Written by Ben Gosling for Commercial Trust Ltd.

References

1. “Response to the consultation on the proposed cost increase to the congestion charging scheme” London Chamber of Commerce and Industry. Feb 2005.

2. “Central London congestion charging: impacts monitoring”. Transport for London. Jun 2006.