Own your destiny

Jill Ansell-Douglas may buy premises. Photo / Doug Sherring

Some smaller businesses are finding it is becoming more viable to own their premises rather than rent them.

David Deakins, the director of the New Zealand Centre for SME Research at Massey University, said buying would make sense in the current economic climate.

"With the declining property values, there's an opportunity to do that."

He said buying could be a benefit because the premises could then be used if the business was to approach a commercial bank for a loan.

"We're finding that collateral is an important issue in securing funding," he said.

A business would need to weigh up what premises were for sale and what the comparable rent or lease would be. "There may be a squeeze on rent at the moment because of work that has to be done [to the premises] ... insurance is becoming more expensive and it is possible that landlords are trying to seek increased income from rents."

He said that made buying more attractive. "There's also the security of tenure."

Real-estate agent Glenn Curness said it was generally cheaper to own a commercial property than to rent it, because tenants had to cover maintenance, repairs and rates, "but you have to have the equity to start with".

Buying a commercial building required significant upfront capital, he said.

And the value of a building was based on its tenants, so if a business bought a building with other tenants in place and they then moved out, the valuation could be different.

He had three or four clients wanting to buy the premises their businesses were in but were waiting for the right time. All the commercial buildings he had sold during the past 18 months were to businesses already occupying them.

Jill Ansell-Douglas is one business owner considering investing in premises.

A proposition she is considering seems perfect for her lifestyle and business: a self-contained flat could provide space for her operation and two other businesses would provide an income to assist with the mortgage.

"Everyone has said that's perfect for you, yet we know this property's been sitting there for a while."

She credited low overheads for her business having come through the downturn in a position to grow. But she said it was tempting to invest because there appeared to be a lot of opportunities available for people with the resources to make the most of them.

"There are so many empty buildings. [In this case] it almost looks too good."

Deakins said premises were not a major issue for the country's SMEs at the moment.

"Concerns are more to do with the economy, the nature of the market and the continuing recessionary conditions."