5 Things to Check Before Buying a Commercial Property for Your Business in Australia
You've been running your business from rented premises for years. Now you're wondering whether it's time to buy your own office, warehouse, factory or shop.
Owning your business premises can offer greater control over the space and reduce your reliance on a landlord. But buying commercial property is a major financial commitment, and the purchase price is only one part of the decision.
You'll also need to consider whether the property is suitable for your operations, what finance is available and how ownership costs will affect your cash flow.
Before buying commercial property in Australia, check the property's permitted use, physical condition, deposit and finance requirements, total purchase costs and your business's long-term repayment capacity.
Here are five important checks to complete before committing.
1. Check Whether the Property Is Suitable for Your Business
A commercial property might look perfect during an inspection, but that doesn't necessarily mean your business can operate from it.
Different locations have planning rules that affect how land and buildings can be used.
For example, a warehouse, restaurant, office and retail business may have different requirements relating to permitted use, parking, building approvals and facilities.
What Should You Check?
Before making a purchase decision, review:
- Property zoning and permitted business activities
- Existing planning and building permits
- Parking and delivery access
- Accessibility requirements
- Available utilities and services
- Space for equipment, stock and employees
- Any restrictions affecting future modifications
Imagine you're buying a warehouse for a growing distribution business.
The property might have enough floor space, but you also need to consider whether delivery trucks can enter safely, whether loading areas are suitable and whether the building can accommodate your intended storage arrangements.
How to Check Commercial Property Zoning in Victoria
For Victorian properties, you can use VicPlan, the Victorian Government's online planning tool.
It provides information about planning zones and overlays.
You can search a property address and generate a planning property report.
However, a planning map alone does not confirm that your proposed business activity is permitted without further approvals.
Contact the relevant local council or a qualified planning professional if you're unsure.
Practical tip: Confirm the property's suitability for your intended business activities before signing an unconditional contract.
2. Inspect the Property and Review Its Legal Details
A commercial property is a substantial investment, so its condition deserves more attention than a quick walk-through.
An attractive office or recently painted warehouse can still have maintenance issues that affect how much you'll need to spend after purchasing.
What Should You Inspect?
Depending on the property, important items may include:
- Roof, walls and foundations
- Electrical and plumbing systems
- Heating, cooling and ventilation
- Fire safety systems
- Loading areas and access points
- Signs of water damage
- Structural modifications
- Building compliance and outstanding maintenance
A qualified building inspector or other relevant specialist may be able to identify issues that aren't obvious during a visual inspection.
For older industrial properties, environmental due diligence may also be appropriate, particularly where previous activities could have affected the site.
Check the Property's Legal Position
Ask your conveyancer or solicitor to review the title and relevant documents.
These may reveal easements, restrictions or other matters that affect the property.
If the property is part of a commercial owners corporation or strata arrangement, review the applicable fees, rules and shared maintenance responsibilities.
What If the Property Already Has a Tenant?
An existing lease can affect when and how you can occupy the premises.
If you're buying a property for your own business, confirm whether vacant possession will be provided at settlement.
If an existing tenant is staying, have the lease reviewed carefully.
Important details can include the lease term, rent reviews, renewal options, outgoings and any landlord responsibilities.
Don't assume buying the property allows you to remove an existing tenant immediately.
Business Victoria recommends checking building condition, zoning, permits and related property information before purchasing business premises.
3. Understand the Deposit and Commercial Property Loan Requirements
Buying a commercial property often involves a different lending assessment from buying a residential home.
The amount a lender may be willing to finance depends on the property and the borrower's circumstances.
For example, a lender may consider the property's type, value, location, intended use and ability to be sold if necessary.
It may also assess your business income, existing liabilities and capacity to meet the repayments.
What Is Loan-to-Value Ratio (LVR)?
LVR is the loan amount expressed as a percentage of the property's accepted value.
Consider this simple example.
Property purchase price: $1,000,000
Illustrative LVR: 70%
Illustrative loan amount: $700,000
Buyer contribution towards the price: $300,000
This example is for explanation only. It is not a lender offer or an indication of the LVR available to you.
The buyer would also need to budget for relevant purchase costs.
Does Every Commercial Property Need the Same Deposit?
No.
Different lenders may apply different maximum LVRs depending on the property and application.
For example, a standard warehouse occupied by an established business may be assessed differently from a specialised commercial property with limited alternative uses.
A lender may also obtain its own valuation.
If the lender values a property below the agreed purchase price, you may need to contribute additional funds.
What Documents Might You Need?
Depending on the lender, you may be asked for:
- Personal identification
- ABN and business details
- Business financial statements
- Tax returns and BAS
- Business bank statements
- Existing loan and liability information
- Purchase contract and property details
- Evidence of available deposit or equity
Not every lender requests the same documents.
If you're self-employed, the lender may also review the nature and consistency of your business income.
Uniko Capital offers Commercial Property Loans in Australia, helping eligible business owners and investors explore loan options and relevant lender requirements.
Practical tip: Discuss your potential financing position before agreeing to a purchase that depends on obtaining a particular loan amount.
4. Calculate the Full Cost of Buying and Owning the Property
One mistake commercial property buyers can make is budgeting for the deposit without considering the other costs.
The purchase price may be the largest expense, but it isn't the only one.
What Upfront Costs Should You Consider?
Depending on the property and transaction, expenses may include:
- Property deposit
- Land transfer duty, where applicable
- Legal and conveyancing fees
- Building and specialist inspections
- Property valuation costs
- Loan establishment fees
- GST, where applicable
- Insurance and fit-out expenses
For example, buying a commercial warehouse may involve installing shelving, upgrading electrical systems or modifying internal areas to suit your operations.
These costs should be considered before determining how much money you can afford to commit to the purchase.
What About Stamp Duty in Victoria?
Victoria has specific rules for land transfer duty and commercial and industrial property tax.
The treatment depends on the property's classification and transaction history, including whether it has entered the commercial and industrial property tax system.
You can review the applicable information and use the Victorian State Revenue Office's land transfer duty calculator where appropriate.
Ask your conveyancer and tax adviser to confirm the treatment of your particular transaction.
Is GST Payable on Commercial Property?
GST treatment varies according to the nature of the sale.
Some commercial property transactions may be taxable, while others can qualify for different treatment, including certain sales of a going concern where the legal requirements are satisfied.
Don't assume GST is always included in the advertised price or that your business will automatically be entitled to a full GST credit.
Have the contract and transaction reviewed by an accountant or qualified tax adviser.
Remember Ongoing Ownership Costs
After settlement, you may also need to pay for:
- Council rates
- Applicable land and property taxes
- Insurance
- Repairs and maintenance
- Utilities
- Owners corporation charges, where applicable
- Loan repayments
If the property needs substantial work, you may also experience disruption while the business relocates or renovations are completed.
Practical tip: Prepare a purchase budget covering upfront costs and at least the first year of expected ownership expenses.
5. Check Whether Your Business Can Manage the Repayments Long Term
A property might suit your business today, but you should also consider whether the financial commitment makes sense over the coming years.
Commercial property finance can involve significant ongoing repayments.
If your revenue changes from month to month, those commitments may put pressure on working capital.
Review Your Business Cash Flow
Before borrowing, look at:
- Average monthly income
- Regular operating expenses
- Existing business loans
- Seasonal changes in revenue
- Expected property expenses
- Funds needed for stock, wages and other commitments
Consider what would happen during a quieter trading period.
For example, could your business still meet its loan repayments if customer payments were delayed or revenue decreased for several months?
Understand the Loan Structure
Commercial property loans may have different repayment arrangements.
Some facilities involve principal-and-interest repayments, while others may provide interest-only periods, subject to lender terms.
Loan periods, fees and repayment conditions can also vary.
Before agreeing to a loan, check the interest rate, repayment schedule, review conditions and any amount due at the end of the term.
Also consider the costs of refinancing or exiting the loan early.
Think About Your Future Business Plans
Ask yourself:
- Will this property suit the business in five years?
- Could the business need more storage or office space?
- What happens if you relocate?
- Could you lease the property to another business?
- Would selling the property be practical if circumstances changed?
A property can be valuable to your business, but it also ties up money that might otherwise be used for equipment, stock or expansion.
Compare the financial effect of buying with the likely cost and flexibility of continuing to lease.
Uniko Capital also provides Business Loan Services for eligible businesses exploring funding for working capital and other business purposes.
Quick Commercial Property Buying Checklist
Before purchasing business premises, review these five areas.
| What to check | Questions to ask |
|---|---|
| Zoning and business suitability | Can the property legally and practically support my operations? |
| Property condition and legal matters | Are there building defects, title restrictions or tenant obligations? |
| Deposit and finance | What loan amount might be available, and how much cash will I need? |
| Total purchase costs | Have I included taxes, inspections, legal fees and fit-out expenses? |
| Cash flow and future plans | Can the business afford ownership over the long term? |
This checklist is a starting point. Every commercial property transaction has its own requirements.
Is Buying Commercial Property Better Than Leasing?
There isn't one answer that suits every business.
Buying may provide greater control over your premises and the opportunity to build equity over time.
However, ownership also brings responsibility for expenses and maintenance.
Leasing may involve less upfront capital and provide more flexibility if you expect the business to relocate.
For example, a new business that is still testing its location may prefer to lease.
An established business with predictable space requirements may have stronger reasons to consider purchasing.
The right decision depends on your finances, operational requirements and plans for the future.
Before deciding, compare the cost and obligations of both arrangements with your accountant and other relevant advisers.
How Can a Commercial Property Finance Broker Help?
Commercial property lending involves more than submitting a purchase contract and requesting a loan.
Lenders may consider the property type, valuation, available deposit, business performance, rental income where relevant, and overall repayment capacity.
A commercial finance broker can help you understand the documentation required and compare potentially suitable finance structures.
Uniko Capital is a Melbourne-based finance broking business assisting Australian business owners, self-employed applicants and commercial property buyers.
Its commercial property finance service covers enquiries for eligible offices, warehouses, factories, retail premises and other commercial property types.
The team helps applicants understand lending requirements, compare loan terms and prepare relevant information for lender assessment.
Final approval and loan conditions remain with the lender.
You can explore the financial institutions listed on Uniko Capital's Our Lenders page.
Explore Commercial Property Finance with Uniko Capital
Buying business premises can be an important financial decision.
Before committing, take time to confirm that the property suits your operations, understand the total costs and assess how loan repayments will affect your business.
Uniko Capital assists eligible Australian businesses with exploring commercial property finance options.
Whether you're considering an office, warehouse, factory or retail property, the team can help explain lender requirements and available finance structures.
Planning to Buy Commercial Property in Australia?
Explore Commercial Property Loans
Uniko Capital Pty Ltd
Australian Credit Licence: 577377
Head Office: Suite 304, 111 Overton Road, Williams Landing VIC 3027
Phone: 1300 086 456
Email: admin@unikocapital.com.au
Website: www.unikocapital.com.au
Disclaimer: This article provides general information only and does not constitute personal financial, credit, property, tax or legal advice. Property purchase requirements, taxes and loan conditions depend on individual circumstances and the relevant jurisdiction. Seek appropriately qualified professional advice before entering a property purchase or finance agreement.
Frequently Asked Questions
Can a small business buy commercial property in Australia?
Yes. Eligible small businesses may be able to purchase commercial property using business funds, borrowing or an appropriate combination of both. Finance availability depends on the lender's assessment.
How much deposit is needed for a commercial property loan?
There is no universal deposit requirement. The amount depends on the property's accepted value, lender LVR limits, borrower circumstances and available security or equity.
Can self-employed people get commercial property finance?
Potentially. Self-employed applicants may qualify, subject to lender requirements concerning income, trading history, financial documents and repayment capacity.
Is GST always payable when buying commercial property?
No. The GST treatment depends on the transaction. Some sales are taxable, while others may receive different treatment under the applicable rules. Seek qualified tax advice before signing.
Can Uniko Capital help with commercial property loans in Melbourne?
Yes. Uniko Capital provides commercial property finance broking services for eligible business owners and investors in Melbourne and across Australia.
