Selecting the right business location for expansion

The UK’s commercial real estate market is predicted to reach £53 billion in 2025, with the value of commercial property in England and Wales predicted to reach £112 per square foot within the next 9 years. 

If you’re planning to invest in a new business location as part of your expansion strategy, there’s one key component you want to get right straight away – the location. Here’s how to choose a business location that can fuel growth, rather than become a drain on resources. 

Why does choosing the right location matter for expansion? 

You can paint the walls, fix the floors, and run new pipes through a commercial property. But the one thing you can’t do is pick it up and move it to a new town, city, or neighbourhood. 

Your business location can add to your prestige and visibility, increase foot traffic, and put you in greater proximity to your target customers. All of which can have a strong impact on growth. But even if you don’t operate a storefront or interact with customers or the public from the business site, the right location can still make a huge difference on two key components: your potential employee pool and your bottom line. 

The average time spent commuting to work in 2023 was 29 minutes. This means when it comes to hiring team leaders, the C-Suite, and other employees, where you move will likely have an impact on which candidates apply. 

Location can also have an impact on what the government charges you by way of business rates, how much you pay in utilities, and how expensive maintenance costs will be. Location can also impact stock accessibility. For instance, you may be charged more if a supplier has to take a long detour to bring products to your door. All of this can have an impact on your bottom line. 

What to consider when choosing a business location suitable for growth

There are several factors you'll want to keep in mind when searching for a business location, including some of the following.  

Foot traffic 

Foot traffic is particularly essential if you operate a brick-and-mortar storefront that attracts passersby. Especially if you're moving from a popular location that's currently bringing in traffic. Consider ‌foot traffic in the local area if this is relevant to you. 

Pay particular attention to the time of day this foot traffic occurs. For example, if it’s all centered around rush hour times, this may be suitable if you operate a coffee shop, but could be less helpful if you’re trying to grow a retail clothing business. 

Business suitability 

The suitability of the premises should be relevant to your business. For instance, setting up a manufacturing warehouse in a small property in central London might present more friction than setting up a coffee shop or office centre in the same location. 

Property expansion potential 

You’ve got plans to grow – so you want to make sure the property matches those plans. Is there space to build? Let’s say you’re purchasing a new office block, but you have plans to double your team within the next five years. Do any of the neighbouring properties look suitable, or are you surrounded by brick-and-mortar stores that may require heavy refurbishment to fit your needs, should you choose to expand? 

Cost of running the property 

Consider the impact of the location on costs. This isn’t just a case of comparing rent and mortgage rates. Different properties come with differing business rates and utilities costs. Similarly, maintenance costs can vary, for instance, they may be higher if there have been historic mould problems. You might find it helpful to create a budget in advance, which you can reference against your quoted costs to ensure you're fully comfortable with the upcoming payments before you sign any contracts. 

Long-term relevance 

Does the property hold long-term relevance? Is the area up and coming? Can you see a future here? Buying or renting a new business location can be a costly exercise. Consider carefully how much longevity each location holds. 

Local competition 

Is there any local competition that might impede ‌your business? Don’t forget, while a lot of competition can be a problem, some competition can actually be good for your business. 

Consider the last time you went shopping for work shoes. If you had the choice between heading to a single road that contained three different suppliers you could choose between, versus a single store in a single location that you would have to buy from once you made the trip there, it’s likely you’d prefer to have the choice between stores and the ability to walk away from one if they don’t have anything suitable. 

Transportation convenience 

Can your employees get to your location with ease? If not, are you comfortable with what that might mean for your team, i.e. that you may need team members who have driving licences and cars? Consider the transportation convenience of any clients, customers, and suppliers, too.   

How to fund a business location expansion

Okay, so you’ve found the perfect location for your big growth plans, now, how do you fund it? If you’re renting a property, a business loan could help with moving costs. 

However, if you decide you’d like to own the property, you have three main choices. You can choose to use your own funds, which can have an impact on your cash flow and working capital. You could also choose to use equity finance, but finding an investor can be a time-consuming process and you'd need to give up ownership in your business. Alternatively, you could go with debt financing. Here are a few of your choices if you select the latter option. 

Commercial mortgage 

A commercial mortgage is a very popular way to fund the purchase of a new business location. Commercial mortgages are secured business loans and enable you to spread the cost of a property purchase over anywhere from 3 years to 30 years. They are, by their nature, larger loans, and generally come with more favourable interest rates than something like a  short-term business loan. 

Semi-residential mortgage 

Are you doubling up your business premises as a home? If so, you may be able to get a semi-residential mortgage. These can be helpful for small business owners, convenience shop owners, and creatives who work within their home. 

Bridging loan

A bridging loan bridges the gap between funding. Essentially, if you need to purchase a property today, but won’t be selling your current property until you’ve already moved into the new one. A bridging loan can provide the funding you need to complete the sale, and you can then repay the loan once the sale of your original property goes through. 

Auction finance 

Have you found a few interesting properties coming up for auction soon? Do you feel you could get a good price on them? If so, auction finance can help you smooth over the gap between bidding on a property and securing a commercial mortgage from a lender.  

Find a commercial mortgage with Funding Options by Tide

We help eligible borrowers find funding ranging from £1,000 to £20 million from our network of over 120 lenders. Submit your information to our team to find out if you’re eligible for property finance and if so, how much you could hope to borrow. 

Find a commercial mortgage.

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.