21st July 2024

A guide to buying commercial property

Buying a commercial property is an exciting leap for business owners and investors, and purchasing by auction makes this a straightforward buy without the added rigmarole of traditional sales. However, it does still require diligence and a strategic decision making process to find the right lot. To help you navigate commercial property ownership, we’ve compiled this guide to assist you in taking the first steps by purchasing a suitable property. 

Whether you’re a seasoned property investor who’s expanding into new investment opportunities, or you’re a business owner who’s looking to leave renting behind by owning your commercial space, keep reading as we discuss some of our top tips for selecting the right property.

What do I need to know before buying a commercial property?

Buying your first commercial property can be an exciting venture, no matter if you’re a seasoned investor looking to rent out your building to other businesses, or whether you’re setting up your own enterprise and need an appropriate working space.

However, it’s important not to rush a commercial property purchase as you’ll need to make an informed and thoroughly researched decision to ensure you maximise your ROI and purchase a space that works for you and your business goals. To help you figure this out, we’ve listed some common areas below that are often overlooked in the buying process so that you don’t fall into the trap of making avoidable mistakes. This includes looking at location, considering your finance options, accounting for possible incurred costs and paying attention to renovation limitations, as well as accessibility.

What are the different types of commercial property?

Not all commercial spaces are the same. When you decide to purchase a property, the first thing to consider is what purpose you’ll need it for and whether the lot is suitable for this. There is a possibility that you will be able to convert an existing commercial space into something else, but this will be subject to planning permissions and, if applicable, regulations set out by the leaseholder. For example, office spaces in dedicated blocks are not likely to gain permission to be converted into retail or industrial units. To help identify the type of space you need, we’ve laid out the five types of commercial properties below:

• Office spaces – used for professional work, not usually open to the public.
• Retail – this consists of single retail units, shopping centres or marketplaces and supermarkets.
• Industrial units – these consist of warehouses and production facilities such as factories or laboratories.
• Leisure and hospitality – this category consists of things such as sports centres, restaurants, cafes, gyms, and activity centres.
• Healthcare spots – this usually consists of private medical facilities or residential healthcare units like care homes.

In addition to the type of commercial property, you’ll need to consider the location to ensure it’s the right fit for your investment. For example, is your retail unit situated in a place that receives adequate footfall? Does your leisure facility have ample parking to accommodate guests? Is your office space located in an appropriate area for commuters and employees? These are all things that you’ll need to keep in mind when searching for a property to buy.

How does buying commercial property work?

Buying a commercial property at auction works largely the same as buying a residential lot, in that you can download the legal pack and head straight to auction if you’re interested in purchasing. If you’re the winning bidder, the conditions remain the same, you will have a limited window to complete and exchange contracts and funds for a deposit and fees will need to be released immediately. You can read more about how these online auctions work on our dedicated blog, or you may wish to visit our guide to unconditional and conditional auctions to better understand the time frames and conditions associated with each method of sale.

Of course, there are a few extra steps that you’ll need to take, such as sorting out the relevant insurance and security, local authority charges and things like commercial waste disposal. Then there is also the refurbishment, startup and business registration costs to consider if applicable. When buying a property, ensure that you account for all of these in your budget.

Things to look for when buying a commercial property

Just like residential buying, it can be easy to get swept up in the excitement of it all, especially when you fall in love with a lot. However, it’s important to prioritise practicality for commercial lots. There are plenty of other factors that will need to be considered beyond the look of a property, and lots of research to undertake. To help you make an informed decision, we recommend that in addition to calculating a watertight budget that includes all possible outgoings as well as potential ROI, you think about the following areas when choosing a property:

Is the property flexible enough to accommodate your business?

In the majority of cases, business owners seek to grow and expand their company. If you see a commercial property that you like, assess whether it will be able to accommodate your future plans or goals adequately or whether you’ll need to eventually move out and sell or use the building for something else. You should also think about if the premises is able to accommodate changing markets and economic trends, or is it too static? If you can afford it, it’s okay to buy a bigger space than you need at first, as you can help to mitigate changing economic conditions by renting out any unused space to other businesses who want to operate out of your building. Alternatively, you can just keep this space available if you plan to expand quickly and don’t foresee any major issues that would cause a setback. 

How has the property performed previously?

Consider whether the property is a viable investment by assessing how it has historically performed. For example, does it receive adequate trade footfall, or is it easily accessible as an office space? You can also look and see if it has any recurring issues, and whether it is a listed building which would limit what you can do with the property itself.

Take a look at your surroundings

Location is an extremely important factor to consider when purchasing any property. It would not be the wisest of moves to set up directly near a competitor, nor would it be adequate to place an office space near ongoing building works. Walk around the immediate area of the property and identify if there will be any issues that can impact your ROI, potential employees or ideal customers.

Is your building accessible?

You must check the functionality of the lot that you intend to buy. Will you be able to accommodate customers with limited mobility if you are operating a retail or leisure facility? Alternatively, for factories and industrial units, will large lorries be able to access the premises to drop off or pick up products and materials? Is there sufficient parking available for anyone using the building, or is it centrally located and easy to find?

Find a commercial property with SDL Property Auctions

No matter your goals in buying a commercial property, our regularly updated catalogue has an excellent range of retail, industrial and office lots to choose from. To find a suitable property for you, click the button below to find available commercial property lots and upcoming auction details. Alternatively, if you have any further enquiries about purchasing a commercial lot by auction, you can contact a member of our team who will be able to assist.