Start up - commercial premises costs
Discussion
Hi all
As I'm sure many do, I've been sat at my corporate desk tinkering with a start up idea.
I have some questions on rental of commercial premises and general costs - googling doesn't give clear answers (probably my fault) and interested in real world experiences.
I'm not going to specify what the idea is, but for the sake of ease, assume it's a cafe type thing.
The unit size would be 1000-2000 sq ft.
Monthly property costs besides rent:
Service charge?
Utilities?
Buildings and contents insurance?
Liability insurance?
Others?
Also, in terms of fitting out, I've read an estimate of c.£90 per sq ft. for good quality. About right?
As you can tell, all new to me and will probably remain a pipe dream as have all my other "game changers"
Thanks
As I'm sure many do, I've been sat at my corporate desk tinkering with a start up idea.
I have some questions on rental of commercial premises and general costs - googling doesn't give clear answers (probably my fault) and interested in real world experiences.
I'm not going to specify what the idea is, but for the sake of ease, assume it's a cafe type thing.
The unit size would be 1000-2000 sq ft.
Monthly property costs besides rent:
Service charge?
Utilities?
Buildings and contents insurance?
Liability insurance?
Others?
Also, in terms of fitting out, I've read an estimate of c.£90 per sq ft. for good quality. About right?
As you can tell, all new to me and will probably remain a pipe dream as have all my other "game changers"
Thanks
Your fit out coats could be anything you chose, genuinely the sky is the limit, but remember that you’ll usually be responsible for putting the unit back to how you found it.
Commercial property often carries maintenance liabilities, so you may also need to budget for these (and perhaps a condition report to show the ingoing state).
The structure of the deal can also be different to residential property. Off the top of my head:
Preserving headline letting rates is a big thing for many, so the deal is often done on rent-free periods (I.e. x months rent free on a term of y years). You’ll get a longer rent free period if local market condition are poor or you sign up for longer terms.
It’s not uncommon to have break periods in longer leases, but I doubt you’d want to go too long if it’s pure startup.
Watch out for rent review clauses. These will typically look to align with local market, but I’d be very wary of any right now that automatically increased or were “upward only” (I.e. yours doesn’t fall at review time if the local market tanks).
If relevant, car parking can also be a big part of any deal. Planners tend to work on a number of spaces per square foot and “assume” that many will take public transport/cycle/teleport. As a result, developments often don’t have enough parking to go round but you can sometimes nab more into your lease to seal the deal (and make sure they’re defined in your lease and clearly marked).
Lastly, watch the lead time/installation cost for telecoms installation if what you need isn’t there. It can take ages and cost way more than you’d expect if your only experience is a residential BT install.
Commercial property often carries maintenance liabilities, so you may also need to budget for these (and perhaps a condition report to show the ingoing state).
The structure of the deal can also be different to residential property. Off the top of my head:
Preserving headline letting rates is a big thing for many, so the deal is often done on rent-free periods (I.e. x months rent free on a term of y years). You’ll get a longer rent free period if local market condition are poor or you sign up for longer terms.
It’s not uncommon to have break periods in longer leases, but I doubt you’d want to go too long if it’s pure startup.
Watch out for rent review clauses. These will typically look to align with local market, but I’d be very wary of any right now that automatically increased or were “upward only” (I.e. yours doesn’t fall at review time if the local market tanks).
If relevant, car parking can also be a big part of any deal. Planners tend to work on a number of spaces per square foot and “assume” that many will take public transport/cycle/teleport. As a result, developments often don’t have enough parking to go round but you can sometimes nab more into your lease to seal the deal (and make sure they’re defined in your lease and clearly marked).
Lastly, watch the lead time/installation cost for telecoms installation if what you need isn’t there. It can take ages and cost way more than you’d expect if your only experience is a residential BT install.
Energy costs! How well-insulated is the property? How is it heated / cooled? Does it have very high ceilings?
Repairing liability: try very hard to avoid an FRI (Full Repairing and Insuring) lease unless you’ve a very good surveyor (more £) or are very sure of yourself. Somebody I know took out a 5 year FRI lease on a unit; 6 months later, the landlord’s surveyor appeared, followed shortly by a notice requiring the tenant to replace the whole roof…
Rubbish: even if you just generate a bag a week, the law says you must have a waste contract with somebody. You can’t just take it home. In my areas, council inspectors turn up & demand to see your waste contract (if you’re not paying the council to do it).
And that brings me to solicitors. You ideally want one properly-acquainted with commercial leases & with a commercial head on their shoulders. I have an excellent one I’ve worked with for over 16 years; he’s not cheap, but not paying for his services is IMHO a false economy.
Repairing liability: try very hard to avoid an FRI (Full Repairing and Insuring) lease unless you’ve a very good surveyor (more £) or are very sure of yourself. Somebody I know took out a 5 year FRI lease on a unit; 6 months later, the landlord’s surveyor appeared, followed shortly by a notice requiring the tenant to replace the whole roof…
Rubbish: even if you just generate a bag a week, the law says you must have a waste contract with somebody. You can’t just take it home. In my areas, council inspectors turn up & demand to see your waste contract (if you’re not paying the council to do it).
And that brings me to solicitors. You ideally want one properly-acquainted with commercial leases & with a commercial head on their shoulders. I have an excellent one I’ve worked with for over 16 years; he’s not cheap, but not paying for his services is IMHO a false economy.
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