Should your business lease or buy commercial space | The primary concern everyone probably has on their mind in the process of starting up or venturing into a new business operation is related to making their career or business as successful as possible with the least amount of money as possible. If you intend to upgrade or downsize your office space and you are debating whether you should lease or buy commercial space, this is the right article for you. We will discuss the benefits and drawbacks of both leasing or buying office space so that you can decide what works better for your business.
Consider the location when you lease or buy commercial space
Before we dive into the advantages and disadvantages of buying or leasing a property, it must be noted that location is everything in the world of commercial real estate. So, if you are looking to buy or lease a building or a floor to house your business, you should mainly focus on how that location currently fares with regard to important things such as amenities in the area. Deciding where you want to relocate your offices might also depend on where in the city your customer base might be in so that you can establish your headquarters in a location that makes sense for your business.
Depending on the market your business is in, it might be financially prudent to transfer all of your business operations to an online working mode and simply keep your online business running from a distance. Be what it may, let’s take a look at what the pros and cons of buying and leasing a business property are.
Advantages of buying commercial space
Low financing costs in the long term
If the mortgage rates for purchasing commercial space in your area are low at the moment, you should take advantage of this and build your ownership equity. Furthermore, lease rates can fluctuate considerably from year to year, which is rarely the case when it comes to mortgage rates.
Lease rates are influenced by improvements to the building, ever changing property values in the commercial real estate market, supply and demand, and other factors. This means that you are not in control of the terms in the lease agreement, which might change considerably when you renew it at the end of the lease term.
Therefore, when you take out a mortgage for buying office space, you will pay off your mortgage in predetermined instalments, which allows greater control over your spending in the long run. Owning your own office space can also prove to be financially rewarding over the years since you will be keeping tabs about your monthly bills and yearly maintenance costs.
Consider buying commercial space if you have expensive equipment
If running your business involves using specialized equipment or machinery, these devices and equipment might be very expensive to move safely. Leasing your business premises might put you in a difficult situation if you are required to relocate to another location. If this is the case, then paying extortionate amounts of money on moving is best avoided by purchasing your own commercial space.
If you plan to relocate in the near future (hopefully, to your new self-owned commercial space), ensure easy transfer to new premises by hiring an experienced and reliable moving company that will treat your equipment with care.
Potential increase in property value
If you are lucky enough to find a property in an up and coming area in your city, it is reasonable to expect that you will eventually profit from this property if you decide to sell it. Additionally, all the properties that you own at the moment are an asset which can be used for collateral if you have to pay off any debt.
You can sublease your property or parts of it
Not only will you be your own landlord, you can also lease offices to other businesses in order to make additional income with which you can cut costs if you have a small business. This is a good way to balance out your expenses, but is only a viable business plan if there is steady demand for office space in your neighborhood.
Disadvantages of buying commercial space
Decline in property value
Just as you might expect to make a profit if the property values in your area increase, you have to be prepared for things turning the other way around. Since commercial real estate trends can vary from year to year, owning a devalued property is definitely a setback for advancing your equity status. Furthermore, if the need to relocate to a new location arises, owning a non-profitable property might put you in a difficult financial position.
If you are operating within a precarious industry, then leasing is a better option than investing in your own commercial real estate. If you find yourself in a position to have to move to new premises, we suggest you hire vanexpressnj.com for a good quality service at a reasonable rate.
You are business is a startup
Starting up a new business or project is difficult to manage in any financial climate or circumstances. Investing your capital into your business rather than purchasing a property might be a more lucrative idea until you make some profit. Then you will be able to reorganize your business and take into consideration the possibility to invest in commercial real estate.
Cost savings might not be that pronounced
If you are not sure if it is better for your business to lease or buy commercial space, you have to do your research and inform yourself about the actual costs of the property’s maintenance. So, you have to take into account taxes, monthly and yearly maintenance costs, potential repairs, security, insurance, parking… While you have to cover all of these expenses when you own the building, a lease agreement will usually include all of this within your monthly rent.