Businesses looking to rent commercial property for the first time will share concerns about choosing the right lease for their new premises.

The dilemma between choosing a long term and short term lease is very common and those who make the wrong decision often face awkward implications.

Although 25-year leases are very much a thing of the past it is still possible for businesses to go to the wall after a matter of months and still have many years of a lease left on a commercial property.

Short term leases are increasingly common in modern day business, but there remain pros and cons of both long term and short term commercial property leases.

Long term leases

Pros:

A long term commercial lease is ideal for businesses that are stable and are looking for premises to grow into for the foreseeable future, enhancing their business presence.

Some long term commercial property agreements now include break options at natural phases, giving firms a get-out clause for a set fee, as well as continued stability if they choose to remain in the property.

 

Cons:

Small and medium-sized enterprises (SMEs) with significant growth potential may not wish to be tied down to a long term lease that restricts their ability to move into bigger office space to let without paying a penalty fee.

The longer the commercial property lease the more stamp duty is potentially payable by tenants. It is therefore advisable to consult with a legal advisor to calculate the likely stamp duty payable on any terms proposed.

Short term leases

Pros:

Short term commercial leases are ideal for SMEs looking to grow in their early years. It gives them the flexibility to search for bigger premises within a few years, whilst staying in existing premises at a relatively low financial risk.

Businesses with minimal start-up capital will also be attracted to short term leases due to the reduced stamp duty, which is calculated as a percentage of the total rent payable over the lease period i.e. significantly cheaper than a long term lease.

 

Cons:

The main drawback of a short term commercial lease is that tenants may not be able to renew their lease if they wish to stay
longer. Renting multiple premises on short term commercial leases may work out more expensive than having a long term lease that allows you time to establish your business in one location.

Renting commercial property is not something that any business should take lightly. If your business is expanding quicker than expected or you require some additional workspace in the interim, why not view our short term let commercial properties for a low commitment property solution.

 

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Pall Mall Estates have a wide range of low cost commercial properties across the UK.

Take a look at our available spaces here or get in touch with our experienced team here.

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