“Any business, irrespective of market sector, will have common reasons for moving or expanding, such as having overgrown its premises, lease renewal due, or the suitability of the premises themselves for the purpose required,” says David Broschomb, chair of the Institution of Commercial & Business Agents (ICBA). “However, a printing company may have additional reasons, such as the need to purchase new and more up-to-date printing equipment, which requires larger premises.”
Broschomb adds that a shifting customer base and a location that is no longer most suitable are also common reasons for a move.
Strategy
What will be necessary is to decide which path – expansion or relocation – will be best by identifying the benefits and challenges of each.
Important considerations will be the size of your business, its growth potential, location, whether it is a freehold or leasehold property, whether the required consents from landlord (if applicable) and local authority are obtainable and what building amenities you need to be successful.
“Relocating or taking new space should be a strategic decision that takes the business plan into account and matches your growth aspirations. It is important you bring your property and even facilities manager into this discussion as they will understand the day-to-day problems your business currently faces in the space it has,” says Johnny Dunford, global commercial property director at the Royal Institution of Chartered Surveyors.
Space
First off, you will need to establish how much space your business requires. “Consider the working structure of the company, such as whether it can work in an open plan environment, whether it has separate departments, and whether those departments will need separate rooms or floors,” says Brett Sullings, commercial manager at Sterling Ackroyd. “Some additional space you need to bear in mind is for separate rooms such as meeting and boardrooms.”
In many sectors, space is commonly dictated by the number of employees in the office. However, in the print world, it is often the machinery that is king.
Whether expanding premises or planning to move to a new site, it is crucial that a printing firm think about its existing equipment, and what it will take to move it, as well as any potential new machinery, as this could prove a critical factor in deciding whether to move or expand.
“The scale of the printing operation will determine type of floor, ceiling, heating and air-conditioning required, among other factors,” says Yasser Elkaffass, director at Adam Hayes estate agents. “But ultimately, the type of equipment, and its size, deserves due consideration in the designing of the building – whether expanding an existing site or moving to a new factory.
“A large company, for example, may demand a very high ceiling clearance or will need heavily reinforced concrete footing under the machines,” he adds.
Expansion
To maintain good relations with local customers, and to avoid having to tamper with existing stock and equipment, it may be in a business tenant’s best interests to stay where it is and expand its existing premises.
This was certainly the best-case scenario for Watford-based Rocket Graphics. Having already installed a mezzanine extension to its existing factory, Rocket found that further expansion was needed to cope with increasing workloads, a higher number of staff and, ultimately, more equipment. But rather than move to different premises, the company recently opted to double its existing floor space by knocking through to an adjoining unit.
“Had the second unit not become available, we would have had to look elsewhere,” says business development director David Wicks, who points out that the upheaval of moving premises could have caused disruption to his business.
But while Rocket’s floor space and business rates doubled overnight, as a result of its property expansion, the management team knew that turnover would not, and so Wicks turned to the property’s landlord to negotiate a rent-free period.
Greater bargaining power
Wicks’ success in renegotiating a better deal indicates that some companies in need of additional space could find it financially beneficial to expand their existing unit, rather than move property, as this gives them greater bargaining powers with a landlord, especially if they are set to take on more space at a higher overall rent.
Unlike more conventional property types, such as residential or retail, the sort of premises that printers typically occupy, such as light-industrial units, are generally not easy to re-let quickly, and so it may be in a landlord’s best interests to retain an existing tenant, even if it means offering some kind of deal, such as a rent holiday.
“Rent-free periods can often be agreed when negotiating a new lease,” says Jennifer Caplan, a surveyor at TSP Commercial Property Services. “However, with commercial property market conditions improving, rent-free periods are generally becoming less generous.”
An expansion also negates the requirement for specialist removals. Nonetheless anyone wishing to extend their property will have to take various important considerations into account – considerations that might make staying put less viable after all.
“If the property is leasehold, does the printing firm have the landlord’s permission in writing [to expand the premises] and how does that effect the terms of their lease, particularly if it’s a ‘fully’ or ‘internally’ repairing and insuring lease?” asks ICBA’s Broschomb.
Obviously, a landlord’s consent is not needed if the property’s freehold is owned by the business, but it will still be necessary – whether freehold or leasehold – to get planning permission from the local authority; a requirement for most new buildings or major changes to existing units.
Applying for planning permission
A planning application is generally straightforward and can be done via post or online, and depending on the scope of the proposed work, it should be possible to get an answer within a few weeks.
To help speed up the process, applicants should discuss their proposals with a planning officer before making an official application to help ensure that all the important planning issues have been considered. But a planning officer’s pre-application comments will be made without prejudice regardless of the council’s final decision.
“Enquire initially with the planning department of your local council and check to see if there is a precedent; ie, has a similar property been extended within close proximity?” adds Broschomb.
The legalities of extending
The extension of a factory will require that a company comply with various legal and regulatory requirements. Some to be aware of are the CMD Regulations, which are designed to improve health and safety, thus reducing risks on site; and the Party Wall etc. Act 1996, which provides a statutory framework to enable neighbours who share a boundary to carry out building works.
And remember that when planning an extension, a building survey is crucial. The surveyor will inspect the property and compile a much-needed Schedule of Condition, which records the state of a building.
Businesses should strongly consider what alterations are planned, because if renting, they’ll have to give the property back at the end of the tenancy in the same condition as to when they took it, in accordance with the Repairs and Alteration clause in their lease.
So to stay or go?
By now printers will be getting the picture that staying put, while sometimes the best option, is by no means always the most straightforward. Because of these significant renovation costs, it could be more practical and cost-effective to move to a new property instead.
Broschomb urges printers to consider whether it’s cheaper to extend an existing property or move to a bigger unit. “Is the business expansion the time for relocation?” he asks.
John Lyall, general manager of Leeds-based Awesome Merchandise, agrees: “If your production lines have inefficiencies and cannot grow, it is probably time to think about moving. The money lost through inefficiencies can be reaped in productivity gains if you have designed your workflows correctly and have the correct property for your business,” he says.
Future expansion provision
Whether a firm opts in the end to expand or relocate, it’s sensible to bear further growth and expansion in mind. But the trick is to strike a balance between room for growth without a significant portion of the space remaining empty. An idle building not only locks up substantial working capital, but adds to maintenance costs.
Summary
Expanding a business typically involves dedication and hard work and so prior to proceeding, check that you and your team are fully committed and that your operation is ready to support growth before investing time and money.
Then address the million-dollar question: to stay put and expand or relocate to somewhere bigger. Moving can seem a very daunting option, but getting planning consent and conforming to all sorts of other legalities, and coping with building work disruption, is not to be taken lightly.
The decision will, of course, be a very individual one, with the style of your factory, the size of your firm, productivity levels, and things like the need for multiple floors all key considerations. Expanding a business is an exciting step, but one which needs very careful thought.
PREMISE EXPANSION: TOP TIPS
Whether your business is large or small, there are several personal and operational issues to consider when deciding whether to expand an existing site or move to a new premises altogether.
Due diligence
Research your local market
When you need a larger factory, it is sometimes tempting to jump at the first opportunity and sign a lease for a new property. However, it is crucial that you conduct all necessary due diligence first regarding the prices and availability of factory space units in the local area that you want to be in. It may be that you are best expanding your existing premises.
Location
When assessing whether a move is right for your firm, you need to take location into account. You will need to be near your client base and accessible for employees.
Talk to an agent
Talk to commercial agents to see what comparable units are on the market, so that you can work out whether moving property really is better value for money.
Power
Printing kit can be power hungry. Avoid unpleasant and expensive surprises by checking this aspect carefully.
Floor space
Consider space
Make sure there is space to accommodate staff and equipment. A small property could prevent a firm from increasing trade.
Share space
A clause in your contract enabling you to sub-let part or all of your new premises, in the event of a downturn in the market or lower growth than anticipated, may be wise in order to cover your back. This will also give your company flexibility in case it needs to bump up to a bigger space.
Extending a premises
Factory layout
Can your firm operate in an open plan environment or is it better to have separate rooms or floors for each department? A mezzanine can be a good use of space, while you will need additional space for meeting and boardrooms.
Legal and regulatory requirements
When expanding a unit you will need to take all necessary legal and regulatory requirements into consideration. This includes CDM, the Party Wall Act, building surveys, and ultimately securing planning consent from the local authorities. Check out the local council’s website for further guidance on the planning process.
Landlord’s consent
You need the landlord’s permission (if applicable) in writing before you can press ahead with expansion plans.
Future expansion provision
Ensure that you factor further potential growth into your business plan and when planning the layout of the factory.
Renting property
Negotiate
Research the existing cost of renting in your area so that you can use this knowledge as leverage to negotiate a better deal on your factory space – whether renewing an existing lease or signing a new one.
Favourable lease terms
When negotiating terms and conditions, try and ensure that you get the best deal possible, including rent-free periods and break clauses. A crucial component to looking ahead in your business’s future is determining the duration of the rental lease you want to sign.
Research your landlord
To avoid unscrupulous landlords, do your homework about your prospective landlord. Check to see if there are any reviews - good or bad – online, and try to find out what they have charged previous tenants.
Buying property
Property acquisition
Generally, the most important incentive for acquiring property is the security of knowing that you will not have to move unless you want to and not having to answer to a landlord. It’s not for everyone though. “I cannot see the merit of buying a factory,” says Andy Wilson of Rochester-based PressOn. “If we bought a unit it would impact on our profits and ability to grow. We are better off renting as it offers greater flexibility.”
Securing a mortgage
There are a plethora of mortgage deals out there, so ensure that you choose the right one for your business. Check out what your bank or building society can offer, use mortgage comparison tables, and consult an independent mortgage broker.
Mortgage rates
Businesses seeking a commercial mortgage will find that lenders generally require a deposit of 25%-40% of the property’s value on a mortgage term of typically 5-30 years, with variable rates starting from around 3.25%. Obtaining a commercial mortgage is based on your firm’s ability to make the repayments. Commercial property lenders can also provide flexible and tailored loans to extend or develop your premises.
Keep disruptions to a minimum
Whether buying, renting or extending your existing site, try to undertake the changes during the quieter times of the year.
