How Easy Is It to Rent a Commercial Property as a First-Time Business?

Renting a commercial property for the first time can be an exciting yet daunting experience for new business owners. The idea of securing your own space to operate and grow your business is thrilling, but the process itself can seem complex and overwhelming. In Scotland, as with many other parts of the UK, there are several steps and important considerations to take into account to ensure a smooth transition into your new business premises.

Interestingly, 55% of the UK’s commercial premises are currently rented out, a significantly higher percentage than residential properties. This statistic underscores the dynamic nature of the commercial rental market and the critical role it plays in the business landscape. For first-time business owners, understanding this market and how to navigate it is crucial.

This guide will simplify the process of renting a commercial property in Scotland. We’ll cover the key steps, from initial considerations and budgeting to finding the right property and negotiating lease terms.

Understanding Commercial Leases

A commercial lease is a legally binding agreement between a landlord and a tenant for renting commercial property. This contract outlines the terms and conditions under which the tenant can use the space for business activities. Understanding the key components of a commercial lease is crucial for any business owner to ensure a smooth and successful leasing experience.

Key Components of a Commercial Lease

• Lease Term: Specifies how long you can occupy the property, crucial for business planning and expansion.
• Rent and Deposits: Details rent amount, deposit requirements, and payment terms to manage finances effectively and avoid surprises.
• Maintenance and Repairs: Defines responsibilities for property upkeep, repairs, and improvements to prevent conflicts and unexpected costs.
• Use Clause: Specifies permissible business activities to ensure compliance with lease terms and local laws, protecting both tenant and landlord.
• Renewal Options: Outlines terms for extending the lease, helping you plan for business continuity with clarity on renewal conditions and notice periods.

Commercial Property Market in Scotland

The commercial property market in Scotland has shown signs of resilience and recovery despite economic challenges. While transaction volumes in Q2 2024 were down 15% compared to the previous year, momentum is building, and the market is demonstrating promising signs of recovery.

Investor demand for Scottish commercial property remains steady, with occupier demand also stabilising. The Royal Institution of Chartered Surveyors (RICS) reported that three-month expectations for rents have improved. Despite challenges, the commercial property sector in Scotland is attracting interest from funders looking for opportunities. The market is expected to continue demonstrating its resilience and adapt to changing economic conditions.

Renting a Commercial Property in Scotland

The ease of renting a commercial property in Scotland varies depending on factors such as location, property type, and market conditions. While occupier demand has fallen flat in recent quarters, the market is showing signs of recovery, with some green shoots emerging.

Factors Influencing Ease of Renting

• Location: Properties in prime locations or high-demand areas may be more competitive to rent.
• Property Type: Certain property types, such as office spaces or retail units, may have varying levels of demand.
• Market Conditions: The overall state of the commercial property market in Scotland, including factors such as inflation and interest rates, can impact the ease of renting.

Also Read: Commercial Property Investment Explained

Initial Steps for Renting Commercial Property

Before you start your search, consider what your business really needs. For example, if you’re opening a shop, you’ll need to know which areas enjoy the highest footfall and which are frequented by your target demographic. If you’re planning to distribute products, it’s important to be close to transport links. It’s also a good idea to look at what other businesses are in the area and whether here are any incentives or support networks in the vicinity that can help your company to thrive. Here are the initial steps in details: 

1. Determine Your Business Needs

Before starting your search, it’s important to clearly define your business requirements. Consider factors such as location, size, budget, and specific property features that are necessary for your business operations.

• Location: Choosing the ideal location for your commercial property is crucial for ensuring business success. Whether you’re looking for a restaurant, café, shop, distribution warehouse, or office space, tailoring your choice to match your business’s specific needs is essential. Consider factors such as footfall for retail spaces, transport accessibility for warehouses, and commuter-friendly locations for offices. Explore local incentives like Business Improvement Districts (BIDs) and Enterprise Zones that could benefit your operations.
• Space Requirements: Assess your current operations and future growth for the project. Consider the number of employees you have or plan to hire, as well as any equipment or inventory storage requirements. Think about the nature of your business – do you need a showroom, workshop, or meeting space? Don’t forget to account for common areas like restrooms, break rooms, and reception areas.
• Layout: Think about how the layout will support your business operations. Consider factors like open-plan areas for collaboration, private offices for meetings, and designated spaces for customer interactions.
• Transport Links: Check for proximity to major roads, highways, or public transportation hubs like bus stops or train stations. Easy access to these links benefits your employees and makes it convenient for customers to reach your business.
• Parking Facilities: Consider how many employees and customers will need parking spaces and whether you require dedicated or shared parking.
• Budget: Set a realistic budget that includes rent, utilities, maintenance, and other associated costs. Ensure you have a clear understanding of your financial capabilities and constraints.

2. Research the Market Properly

Conduct thorough research to understand the commercial property market in Scotland. Understand the demand for your business in the area, study competitor activity, and analyse economic trends that could affect your success. Gathering this information helps you make informed decisions about location, pricing, and the potential for growth. You can research the market in the following ways:

• Online Listings: Use websites like Westport, Rightmove, Zoopla, and Realla to find available properties.
• Market Reports: Read market reports to stay informed about trends and pricing.
• Local Knowledge: Gather insights from local business owners and community members.

3. Seek Professional Advice

Consult with a commercial real estate agent (Westport Property) who understands the local market and can help you find suitable properties. They can also negotiate lease terms on your behalf. Additionally, consider hiring a lawyer specialising in commercial real estate to review your lease agreement and explain any complex legal terms. An accountant can provide valuable insights on the financial implications of your rental decision, including tax considerations. If you’re planning renovations, an architect or contractor might offer useful input on the property’s potential and limitations. These professionals can help you make informed decisions, avoid costly mistakes, and ensure that your chosen property aligns with your business needs and goals.

Read more: What is a Letting Agent: A Complete Guide

4. Viewing Properties

When viewing potential commercial properties, approach each visit with a critical eye and a clear checklist. Inspect the overall condition of the building, including structural integrity, plumbing, electrical systems, and HVAC. Pay attention to the layout and how it might accommodate your business needs. Take note of natural lighting, ventilation, and any potential noise issues. Check for adequate parking and accessibility. Don’t hesitate to take photos and measurements for future reference. Visit the property at different times of the day to assess traffic patterns and neighbourhood activity. Consider bringing along key team members or advisors for additional perspectives. Remember to look beyond the current state and envision how the space could be adapted to suit your business. Finally, don’t rush – take your time to thoroughly evaluate each property before making a decision.

Essential Considerations for First-Time Renting a Commercial Property

As discussed earlier, renting commercial property for the first time can be a daunting experience, especially in a dynamic market like Scotland. Whether you’re starting a new business or expanding an existing one, understanding the key factors involved in renting commercial property is crucial. This guide covers the essential considerations for first-time commercial property renters in Scotland.

1. Legal Considerations and Due Diligence

Before signing any lease agreement, it’s essential to conduct thorough due diligence. This process should include verifying that the property has the correct planning permission for your intended use. In Scotland, different classes of use are defined by the Town and Country Planning (Use Classes) (Scotland) Order 1997, and it’s crucial that your business activities align with the permitted use of the property. It’s highly advisable to engage a solicitor who specialises in commercial property law to review the lease agreement and explain any complex terms or potential pitfalls.

2. Building Relationships with Landlords and Neighbors

Establishing positive relationships with your landlord and neighbouring businesses can greatly benefit your commercial property rental experience. Maintaining open and regular communication with your landlord is essential for addressing any issues promptly, which can help avoid potential conflicts and ensure a smooth tenancy. Additionally, engaging with the local business community and networks can provide valuable support and opportunities for collaboration. Being an active part of the community can lead to mutual benefits, such as shared resources, increased foot traffic, and a supportive business environment.

3. Assessing the Property’s Condition

When viewing potential properties, pay close attention to their condition. In many cases, commercial properties in Scotland are let on an ‘as is’ basis, meaning you’ll be responsible for any necessary repairs or modifications. Look for signs of structural issues, check the condition of essential systems like heating and plumbing, and consider the costs of any necessary refurbishments or fit-outs. If possible, have a professional survey conducted to identify any potential problems that might not be immediately apparent.

4. Negotiation and Securing the Property

Negotiating the terms of your lease can make a significant difference to your overall costs and flexibility. Consider the following:

• Rent Negotiation: Don’t hesitate to negotiate the rent and ask for incentives such as rent-free periods or contributions towards fit-out costs.
• Lease Flexibility: Negotiate for break clauses or options to renew, giving you greater flexibility as your business evolves.
• Professional Help: Engage a commercial property agent to assist with negotiations and ensure you secure the best possible terms.

5. Planning for Occupation

Once you’ve secured your property, it’s crucial to plan the move-in process carefully to ensure everything runs smoothly. Start by coordinating any necessary fit-out work so the space meets your operational needs. This might include installing fixtures, modifying the layout, or making other adjustments specific to your business. Next, set up essential utilities like electricity, water, and internet before you move in, ensuring everything is ready for your first day of operation. Finally, make sure you comply with all local regulations and obtain any necessary licenses or permits for your business activities to avoid any legal issues.

6. Understanding the Local Business Environment

Each area in Scotland has its own unique business environment. Research the local economy, business networks, and potential for collaboration or competition in your chosen location. Some areas might offer specific incentives for businesses, such as enterprise zones with tax breaks or local council initiatives to support new businesses. Understanding these factors can help you choose a location that not only meets your immediate needs but also supports your business’s growth and success.

Potential Challenges for First-Time Commercial Renters

Here are ten potential challenges for first-time commercial renters in Scotland, UK:

• Legal complexity: Understanding Scottish commercial property laws and lease agreements can be daunting.
• Hidden costs: Unexpected expenses like service charges, insurance, and maintenance fees may arise.
• Lease negotiations: Navigating terms and conditions with landlords can be challenging for newcomers.
• Location suitability: Finding the right area that balances cost with business needs can be tricky.
• Planning permissions: Obtaining necessary permits for specific business activities may be time-consuming.
• Rent reviews: Dealing with potential rent increases during the lease term can impact budgeting.
• Repairing obligations: Understanding and meeting maintenance responsibilities outlined in the lease.
• Business rates: Factoring in and budgeting for local tax on commercial properties.
• Energy efficiency: Meeting required energy performance standards for commercial buildings.
• Exit strategies: Understanding the complexities of ending or transferring a lease if needed.

Conclusion

Renting a commercial property for the first time in Scotland involves careful planning and consideration. By understanding the market, defining your business needs, navigating legal and financial aspects, and conducting thorough due diligence, you can make informed decisions that will support the success and growth of your business. Remember to seek professional advice and take advantage of local resources to ensure a smooth and successful rental experience.

Westport Property, an industry-leading letting agent and property management company in Dundee, we can provide the expertise and support necessary to guide you through the process. With their local knowledge and professional services, you can confidently find a commercial property that meets your needs and supports your business’s future aspirations in Scotland’s vibrant business landscape.