Choosing the most appropriate location for your business premises is a critical decision which can impact your sales, staff and future development.

Overview

Your premises should help you to operate effectively without excessive costs. At the same time, you should avoid being tied to premises that might not suit you in the future.

Different options suit different businesses. By taking into account all the relevant factors, you can identify suitable premises at a location that meets the needs of your business, your customers and your staff.

This guide explains how to search for premises that meet your requirements and how to choose the best location for your business. It also outlines the key legal issues that you need to understand.

Specifying your premises requirements

Drawing up a list of what you need from your premises is a good way to start your search. This list might include the following points:

• size and layout of the premises
• structure and appearance, both internally and externally
• any special structural requirements, such as high ceilings
• facilities and comfort for employees and visitors - including lighting, toilets and kitchen facilities
• utilities, such as power and drainage, and any special requirements - for example, three-phase electricity
• permission, including planning permission, to use the premises for your type of business
• access and parking space - for deliveries or customers, including disabled customers
• whether you need the flexibility to alter or expand the premises
• your long-term business plans

Your choice of premises will also depend on your budget. Whether you rent or buy, costs can include:

• initial purchase costs, including legal costs such as solicitor's fees and professional fees for surveyors
• initial alterations, fitting out and decoration
• any alterations required to meet building, health and safety and fire regulations
• ongoing rent, service and utility charges, including water, electricity and gas
• business rates
• continuing maintenance and repairs
• building and contents insurance

Sellers and landlords are obliged to provide prospective buyers or tenants with an Energy Performance Certificate (EPC). An EPC indicates how energy efficient a building and its services are and can act as a good indicator of likely energy costs.

Choose the right location for your business premises

Factors to consider when choosing a location include:

• the level of passing trade - depending on the nature of your business, the level of passing trade can have a huge impact on the success of your venture
• the number of competitors - although some businesses, like estate agents, can benefit from being located in a cluster of similar businesses, for many others having too many close competitors can have a severe impact on sales and profitability
• transport links and parking - good public transport links and local parking facilities make it easier for employees and customers who don't live within walking distance
• delivery restrictions - these can cause problems for your suppliers, so you'll need to make sure that your premises are accessible if you expect to have regular deliveries
• congestion charges
• planning restrictions - make sure you check whether you're allowed to use the premises for the purpose you have in mind
• local authority charges and business rates for services such as waste collection - these can add greatly to the ongoing costs of locating in a particular area, which may make the premises less desirable from your point of view
• local amenities - employees generally prefer working in areas with good local facilities, and you may need to make regular trips to the bank or a postal depot
• what sort of area it is - the image of your business may well be affected by the nature of your location

Location has a major impact on cost. If you need premises in a prime location the extra costs may be justified.

Legal considerations when choosing business premises

If you own or occupy business premises, you need to understand the legal obligations and restrictions that affect you. For example:

• The premises must have planning permission that allows them to be used for your type of business.
• You must comply with building, fire, and health and safety regulations.
• Stamp duty is payable on commercial leases and you are likely to be liable for business rates, though in rented premises these may be paid by the landlord.
• You are responsible for the health and safety of employees and visitors.
• You also need to provide a suitable working environment.
• If you provide goods or services to the public, you must take reasonable steps to make your premises accessible.
• You need to comply with the terms of any lease or licence agreement.
• For some businesses, you may require a licence to operate or to sell certain products.
• There may be restrictions on times when deliveries are allowed, noise and pollution levels, and how you or your customers dispose of waste.

In licensed or leased premises, responsibilities are shared between the landlord and the tenant. Whatever premises you choose, you need to ensure that you are properly insured.

If you are in any doubt about your legal obligations, you should take advice from your business adviser or solicitor.

Search for premises

It's worth starting by drawing up a specification or 'spec', clearly setting out your requirements. Distinguish between what is essential and what is desirable. You can then circulate this spec to estate agents and surveyors that handle commercial properties in your area. Your local authority, Chamber of Commerce or trade association may also be able to help.

Many local authorities maintain a register of available commercial property. It's also worth investigating any grants, loans on preferential terms and incentive schemes set up to tempt small businesses into urban areas, such as grants from inner city renewal projects, or cheaper premises for small businesses in designated areas. Some councils or local authorities have set up Enterprise Zones to boost local economies.

You may also decide to search for suitable premises yourself. Commercial property is often advertised in property sections of local papers, as well as specialist publications. The NovaLoca website allows you to search for business premises throughout the UK.

Check any potential premises against your spec and eliminate any that don't at least meet all your essential requirements. Then you can draw up a shortlist of properties to visit.

At this stage, you may want to involve professional advisers. For example, a surveyor can assess the condition of premises and give you an idea of their value.

When you're ready to make an offer or agree the terms of a lease, your solicitor can help negotiate the deal and complete the legal work.

Read our guide Renting business premises.