Should You Buy or Lease a Commercial Property?
Many of our clients are conflicted about whether to buy or lease a commercial property. There are a variety of factors small business owners must consider when it comes to deciding whether to buy or lease a commercial property, but at the end of the day the numbers need to make sense for your business.
Finding the right location is only part of the equation for a business owner who’s in the market for new commercial space. Before looking at specific locations, an analysis should be completed showing the benefits of each. There may be times where the business owner does not have an option.
Driving factors that play a key role in the decision-making process is both rental rates and property values. Let’s take a look at how these two factors can significantly change whether it makes sense to buy or lease a commercial space.
The impact of increasing rent and property values on commercial property directly affect whether buying or selling commercial space makes sense. If rents and property values are increasing in a certain area, it’s often better to purchase commercial real estate as opposed to leasing. By purchasing a property, you’re getting the benefit of appreciated value should you ever decide to sell.
In addition to the impact of increasing property values, there are other financial incentives to purchasing a commercial property. Regarding taxes, there are times when the initial outlay that is used to purchase a commercial property is not deductible. This allows for the buyer to depreciate the cost of the property over time. For those who financed the property can receive tax deductions for any interest payments.
If you’re a well-established business and have been operating awhile, but you’ve not purchased any commercial space, it may be time to look into building an asset through the purchase of real estate. However, if you’re business is a startup, leasing may be a better option until your business is solidified.
Buying a commercial space gives you ultimate control of the property. It allows you the freedom to make extensive renovations both inside and offers more options than leasing a space. Renovating a leased property typically requires running any type of changes by the landlord or even may stipulate an outright ban on renovations.
If having a certain location is important, buying may open up an opportunity where no suitable properties are currently up for lease. Purchasing in a prime location (for example, a restaurant or retail establishment in an area with high foot traffic) can mean the difference between the success or failure of your business.
Need help deciding whether to buy or lease a commercial property? If you’re in the market commercial space it can be difficult to know whether it makes more sense to purchase or lease. By working with a seasoned commercial real estate team like ICRE Investment Group, we can help you determine what is the best move for the future of your business.