Be the landlord and the boss

If you’re leasing your premises and your business is in a sound financial position, owning your own premises could be a good option. Here are some of the pros and cons you’ll need to consider.

There are many potential benefits of owning your own commercial property. From a personal perspective, it can be an effective way to build wealth with the potential for the property to rise in value.

From a business perspective, it gives you certainty and control. With no more landlord to deal with, there’s also no more worrying about potential rent rises, or whether your lease will be renewed.

According to ANZ’s Director of Sector Strategies Richard Hinchliffe, there’s another benefit to owning your own premises which can be even more important in the long term.

“In our experience it can open up new strategic options, such as ways to expand your business or enable better customer service,” says Hinchliffe. “For example, one of our customers who supplies recycled parts to a range of customers were looking to expand. But to do so they needed a large industrial site, which can be hard to find in this sector.

“To enable their expansion plans we helped them fund the purchaseof a large second site which meant they could hold a much wider range of products and serve a significant number of new customers. It also gave them the ability to manage more throughput, and effectively doubled the size of their business.”

Hedging your bets, for example buying a commercial property to supplement existing leased premises, can also be a good option. “We helped fund another customer into a second site across the city from their rented premises,” says Hinchliffe. “That not only allowed them to service a wider geographical area and grow their business, it also meant they were able to reduce travel times and stock movements.

“A spin-off benefit was that many staff were able to reduce their daily commuting time. And with two locations they have a wider pool of potential staff, which makes it easier for the business to attract and retain high quality people.”

Of course, owning your own premises isn’t for everyone. Purchasing a commercial property soaks up capital which you may need to establish and grow your business – particularly if it’s relatively new.

While dealing with a landlord can sometimes be a hassle, when you’re the landlord you’re responsible for ongoing maintenance and all the associated costs such as compliance and insurance.

While property prices tend to go up over the long term, they can also go down – and as a landlord you take the risk. With leased premises you also have more flexibility to move if your situation changes.

The decision on whether owning your own premises is appropriate depends on a number of factors. “Every business and every business owner is different,” says Richard Hinchliffe. “You need to think about things like the strength of your business, how much capital you have available and whether a commercial property purchase is the best use for it.

“Most importantly, think about how it fits with your business strategy and your own personal goals. It’s important to get good advice – talk to your network of business advisers before making a decision. At ANZ we can help you understand the financial aspects – call us on 0800 269 249 to talk to one of our Business Specialists about how we could help with funding of commercial property purchase.

“But if the business case stacks up and there is a good fit with your longer term objectives, owning your own premises can be a great way to build wealth and grow your business.