Should I Purchase Or Lease My Office Space…Pros And Cons

Should I Purchase Or Lease My Office Space…Pros And Cons

by Johnny S

Companies need to invest in real estate, whether that investment is in a leased space or a purchase of real estate property. This is true in all locations including Cincinnati and selecting a commercial real estate firm to assist you with executing your plan is essential.

Before making a decision on whether your firm should buy or lease commercial property, it is important to understand the pros and cons of the options out there as influencing factors weighing on your decision.

Some of the more notable factors that require elaboration are:

– the stability of your business model

– whether your business would benefit from a stable location

– your growth prospects

– your cash flow and ability to invest in real estate property

– the economic climate and availability of credit

– the going rate for both rental properties and sale price for commercial property

– tax considerations associated with each option

– the availability of local talent to hire and the changing surrounding community

The State of Your Business

Before deciding if your business is better off renting property or purchasing it you should perform an overall analysis of your business both currently and in the next 5 to 10 years. The state of your business will have a large impact on your decision overall on the best option for selecting appropriate commercial rental space going forward.

For example, a company that is growing significantly may be hesitant to purchase a space that they may outgrow in a couple of years. Leasing office space is often a more flexible procedure though long-term leases may need to be avoided as well. With a lease it can be easier to wait for a lease to expire or rent additional space in a building as your company expands and grows. While it is possible in some situations to renovate or repurpose a purchased building, it is harder to do so, and your business may be constrained by the size of the purchased space. One option is to buy a larger building and sublet a portion of the space until you need it, though this can cause challenges as well when doing so.

Care should also be conducted around the chosen location on your end. Is your business tied to the immediate area or other opportunities to expand in new cities and locations which may provide for better options going forward. When you buy property your business is effectively committing To the local area and is less likely to be able to utilize outside talent outside the vicinity of your local commercial property. This may be the right choice for some businesses that identify closely with their local community and may help to demonstrate to customers that you are there to stay. This can be important for perpetual business such as accounting and legal services. For other businesses, the flexibility offered by leasing is a better option.

Purchasing property requires a significant down payment or commercial businesses while pleasing office space can be more expensive in the long run but often requires less of an immediate financial position of your company will have a big impact on your ability to make the down payment amount for the property as opposed to simply fronting money for an office. Even if your company has cash available to purchase property, it may not make sense to do so if there are other growth opportunities that your business has available. As a result, many mature businesses with steady income and profitability are more likely to purchase commercial property and those that are growing and have many investment opportunities at their fingertips are more likely to lease property. Simply put, investing in growing the business may be a better option for a company rather than investing in commercial property to house their office and Infrastructure.

The State of the Market

The state of the surrounding real estate market, both from the perspective of a renter and a buyer, is important. A business will have to pay attention to factors such as commercial property Occupancy rates as well as the average sale price for suitable commercial property. A Cincinnati Commercial Real Estate form can help you to identify good purchase options for your business.

The loan market for mortgages may impact your decision as well. Some companies may find it challenging to gain access to a mortgage loan due to tightening credit conditions. Some companies have other bank debt that may limit their ability to take out a mortgage loan to buy commercial property, but may be able to lease space more easily. These factors can have a big impact on the decision to buy or lease commercial property.

The Argument for Leasing Commercial Space

Leasing commercial property provides your business with flexibility and the ability to adapt to the needs of your business whether that be by expanding the office space that you need or decreasing the space if your business starts to contract. In addition, when you lease commercial space you have the ability to relocate to a different area if the business opportunities are present To allow you to benefit significantly from the relocation.

It can be challenging for some companies to finance a large mortgage for a purchase of commercial property and it may not be in their best interest to do so if there a better growth opportunities out there for investing in your business and attacking us right side middle of the market that has previously untapped. In these situations, it may be better to lease commercial real estate and benefit from the lower upfront cost of renting.

The Argument for Buying Commercial Property

The argument for buying commercial property for your business is that real estate prices tend to appreciate over time, both in terms of the purchase price for real estate as well as the rental price for commercial real estate. By purchasing commercial property now your business is able to benefit from cost savings over a longer period of time. In addition, Your business may become rooted in the community and can’t have significant advantages in terms of retaining both customers and employees and in maintaining a vital interest in the local area which can provide synergies with local municipalities.

There are also tax advantages to Purchasing commercial real estate. Accounting firms can help you to allocate the cost of the purchase and provide you with accelerated depreciation options which can lower your tax expense both in the short and long-term and provides with real savings as a result in a way that can not be achieved when leasing commercial real estate. Text consideration should always be factored in when determining whether to buy or lease commercial space and hiring a good accountant pharmacist you with the decision is welcome as well.

Therefore, there is no one-size-fits-all solution for buying or leasing commercial real estate. Some businesses benefit from buying commercial real estate while others are better off leasing. It is important for business to understand both internal and external factors when determining what the best option is for their future and to hire a professional to assist in doing so. There is no better professional than a Cincinnati commercial real estate firm that is rooted in the local community and understands both the pricing and market for real estate, whether that be for renting or purchasing space. Be sure to look for a real estate firm that specializes in commercial property as this can be very different than residential real estate.

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