There are few questions that give business owners the kind of headache as the conundrum of commercial real estate ownership.
Leasing has its advantages, but buying can help support the business in the long run. There’s so much to consider with this kind of decision that it can be completely overwhelming. The good news is that businesses often go through various types of real estate occupancy during their lifetimes.
The Advantages of an Office for Rent
A young business with a small operating budget may do best in a leased office, at least at first. Leasing an office generally means that you don’t have to maintain the building, so you won’t have to try to juggle major and unexpected expenses if the roof were to spring a leak. There are other advantages to renting, though, including:
- Mobility for your growing business. If your business is young or is experiencing unpredictable growth, you may find that you’ll outgrow your space much more rapidly than you projected. As long as your lease is for a relatively short term, this isn’t a problem — you can simply move to a bigger space. If you had owned the property, you’d have to deal with renting or selling your existing space, which could take a while and leave you paying for two pieces of commercial real estate much longer than your budget can handle.
- Freeing up cash funds. Renting a space can be considerably cheaper in the short term than buying a piece of commercial real estate. Since you don’t have to pay for regular repairs, insurance on the structure or to maintain the parking lot, much more of your cash flow can be used to grow the business.
- Simplifying tax documents. Owning a piece of commercial real estate can complicate your situation considerably, depending on your business structure. For many businesses, the additional hassle that goes with including owned real estate on corporate taxes is simply more than they are willing to take on.
Of course, leasing isn’t for everybody. In fact, businesses that are stable and established should look into buying their own piece of commercial real estate. Not only will owning your own building give you the freedom to do what you will with it (within zoning regulations), it also sends a message to your customers that you’re there to stay. It’s a huge psychological boon to your marketing efforts, have no doubt.
In addition to making it easier for your business to be found over the long term, owning a piece of commercial real estate means you’re investing in your business’s future. The right pieces of commercial real estate can appreciate considerably during a 10 or 20 year tenure, giving your business even more capital to work with down the road.
Leasing and buying real estate are both valid options for different phases in your business’s growth. In the beginning, you’re often better off to rent a small space so you can expand freely, but as your business becomes established, having a permanent owned location tells the community that you’ve matured and will be a reliable commercial entity well into the future.