One of the biggest decisions that business owners must make from time to time is finding new premises for their growing businesses. Whether you’re renting, let alone buying, moving into the wrong or inappropriate premises can be a very costly mistake.
There are many pitfalls, but the process of choosing the right premises does not need to be overwhelming, says Shane Padayachee, property investments area manager at Business Partners Limited.
Shane recommends dividing your search up into two straightforward phases. First, start with a needs analysis in which you list all the characteristics that your business requires from an ideal premises. Second, once you’ve identified a property that comes closest to your ideal premises, do a due diligence exercise on the property to make sure that you don’t buy a cat in the bag.
Do a property needs analysis:
- Location, location, location: As with any property sale, the location of the property is the most important consideration (Apart from the cost of the premises, which must obviously be affordable for your business).
Think of the ideal location from the point of view of your clients, your competitors, your staff, your suppliers and your shareholders. For shop-front businesses, accessibility by and visibility to their customers are by far the most important factors. The closer to your customers the better, and if you rely on passing trade, your options will be limited to high-traffic areas.
But you might find that the most accessible and visible retail spaces are already congested with your competitors. Think carefully about overtraded areas when you are narrowing down your location options.
For manufacturing and warehousing businesses, easy access by your suppliers could well be the main consideration. And for most businesses, even after the work-from-home boom, easy transport access to and from your staff’s homes is fundamental to remaining a desirable place to work for.
- Think optimal layout: Use your search for new premises to imagine the ideal layout of your premises to optimise production, logistics or customer experience. From this, draw a list of basic, non-negotiable requirements with regards to floor space, exits and entrances, lighting, ventilation and the division into areas such as office space, shop space, storage and factory floor.
Depending on the size and sophistication of your operation, you might even consult work-flow, logistics or retail experts at this stage. There is no harm in adding a list of nice-to-haves to your optimal layout, provided you keep them in that category and drop them if they are not available in your price range.
- Allow for growth: If your business is still growing, don’t squeak into the bare minimum space that you can find. Think ahead and calculate the space you will need over the next few years based on realistic growth estimates.
- Don’t forget parking: Car access and parking are factors that are easily underestimated. It is of course critical for retailers, whose customers may well decide to drive a few kilometres further to a competitor who has easier parking. Other kinds of businesses need less of it, but the lack of suitable parking for staff and suppliers can be a major irritant and a hindrance to operations.
- Think green: The environmental impact of premises is becoming increasingly important, not only because more and more customers prefer to deal with environmentally conscious businesses. Green buildings are also fast becoming cheaper to run and maintain. Therefore, consciously look for infrastructure such as translucent roofing for natural lighting, cavity walls for insulation, solar power, rain harvesting systems and water-wise landscaping.
Do your due diligence
- Zoning: Once you’ve identified a property that looks promising, make sure it is zoned for the use that you want to put it to. A formal check at the municipality is more prudent than relying on the say-so of the seller.
- Crime and security: Ask at neighbouring properties – among management as well as workers who must walk to and from the nearest taxi rank – about crime levels in the area and the presence of local initiatives such as neighbourhood watches or business improvement districts. The building may be perfect, but it is of no use if your staff and customers feel unsafe.
- Basic services: Crumbling municipal infrastructure affect different areas differently. Potholed roads are easy to spot but check among the neighbours about the reliability of power, water, and the stormwater system in the area.
- Do your own counts: If your business services passing trade, don’t rely just on your intuition or on the information from the landlord, seller or property broker. Set aside some time and do your own foot- and car counts. You will not only be able to verify the numbers, but it will also give you a sense of the demographics of the passers-by.
- Find out about any additional levies: If a property is in a business improvement district or in a complex, additional levies may be payable over and above rates and taxes.
- Call on experts: The older the building, the more carefully you must look for possible structural defects. Paying a structural engineer for a few hours of his time can save you a lot of money. Depending on the complexity of the deal, it is also a good idea to run a lease or purchase agreement past a property lawyer.
Beware of buying debt: If you buy a property housed in a CC or a company, you run the risk of becoming liable for any undisclosed debt if you chose to buy the shares of the company. Rather buy the property outright from the company. You can always register a new company to house the property if you don’t want to own it directly. You might not save on transfer duties, but it’s better than having a surprise creditor crawl out of the woodwork.
About the Author: Ben Bierman
