The commercial building you choose has an important influence on the functioning of your company. The building's size, its layout, location and appearance have to enhance business operations, and your business has to conform to municipal zoning and environmental laws.
Commercial buildings come in a wide variety of shapes, locations and price, so you have to know what your needs are and how much you can afford to pay. If you've worked on your business plan, you probably know the amount you can spend on rent/mortgage, utilities and taxes. Your cash-flow analysis, will help you determine whether you can afford to purchase a commercial property or whether you should rent.
Renting may allow you to keep more of your working capital for business operations but ensure that you factor in future rent increases. When you own your property, you know what your monthly mortgage payments will be and you are building equity for your business.
It's always a good idea to seek the advice of an independent commercial real-estate advisor who can help you set the criteria for choosing the right building. He or she should know the area and be familiar with the zoning regulations and any potential issues with the building, its location and potential uses.
The right location
If you're a retailer, you probably want to make sure there's ample parking and pedestrian traffic as well as attractive décor. Situating your business close to a magnet or "anchor" store can provide you with lots of walk-by customers. So if you sell high-end clothing, it might be a good idea to avoid discount malls and locate your business close to other high-end retailers such as shoe stores and jewellers.
While location and décor are less important to the success of a small wholesale or manufacturing operation, you will have to comply with zoning regulations that state which type of economic activity is allowed in which areas of the municipality. You should also consider the availability of qualified employees within a half-hour commute to that location.
For personal, professional or creative services, you may require a series of closed offices in pleasant surroundings with high-speed networking and easy access to public transit. For these types of businesses, the ability to attract and retain qualified employees can be critical to success, so a building in a location that's easy to access can be a strategic advantage.
Does it require modification?
If you've found a suitable building in a good location, consider what it will take to make it just right. It will take money, and the question then becomes "Who will pay?"
If you'll be renting premises that require modification, you'll have to negotiate with the building owner. Make sure that you agree to a contract that specifies what needs to be done, when it should be done and the penalties for not completing the work on time. And make sure those provisions are included as part of the lease agreement.
If you want to buy, use an accredited inspection company to evaluate the building for defects, and the entire property for environmental contamination. Defects can be points of negotiation with the seller—or signs warning of future headaches.
Not all changes however, are within the power of an owner to complete. There may be zoning or heritage regulations that require approval by a local board. Changes such as a shipping door punched into the side of an old brick façade, are sometimes called "minor variances", and require approval by local authorities. This can take time and there's no guarantee that you or the owner will be granted the right to make those changes.
Taxes and infrastructure
Taxes vary between municipalities with some towns offering preferential rates specifically to attract business. Your commercial real estate agent should know what the taxes will be at that location as well as what infrastructure and utilities—including Internet access, garbage pickup, roads, electricity and natural gas—are available at the sites you're considering.
Allowing for future growth
It's great to have room to expand. But paying for extra space that might come in handy at some time in the future, might not be the best application of the working capital that you need today. You have to be reasonably sure that you'll need the space within a relatively short period of time. Again, your business plan and advisers can help determine what you can afford to spend.
Separate your needs from your wants
It's easy to become overwhelmed with the features and options available to you. Once you've looked around and seen what's available, make a "must-have" list of the things your business needs. And then make another list—call it a wish list—of features it would be nice to have, but which are not critical.
If a building doesn't have all the must-have criteria, eliminate that building as a possibility. Try to keep that must-have list short: if it's too long, no building will ever qualify. Once that's been done, the remaining buildings should be ranked according to the quality of those features. Take a loading dock for instance; is it well situated, does it require repair, is there more than one? Use this simple scoring system: rate each feature between 1 (low) and 10 (high). Next, rate the importance of each feature (between 1 and 10).
For instance, the office reception area may rate a "9" at a particular building, but the overall importance of a reception area to your business could be a "2". Multiply the numbers together (9 X 2), do this for every feature and add up the results. Do this for each building you're considering. The three or four buildings with the highest scores should all be carefully considered.
Your choice of building is a strategic decision because it will directly affect your daily life, employee productivity, client satisfaction and the profitability of your business.
