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Your Business Space: Making the Big Decision to Lease or Buy Commercial Property

By Guest Author | September 19, 2016

Office space is essential for most organizations. However, deciding whether to buy or lease can be difficult, as business owners try to work out which is going to be best for their company. The decision can be quite a daunting one, as many factors will need to be considered before anything is decided.

Here are some important questions you need to ask before deciding to lease or buy with companies such as
Will You Be Moving in the Not Too Distant Future?

Purchasing a commercial property is a long-term solution for your business, so, you need to consider whether your business could grow, or shrink, in the foreseeable future. Your future plans need to be considered as you work out whether there could be a growth in demand that would require your business to expand.

Forecasting the market and whether there will be increased demands for your company can be difficult, even if you do have estimates in place. That’s why it’s also important to consider what costs you could meet if you do need to move to another premises. You’ll need to factor in the charges you may meet if you have to move before your commercial property sells and whether you’d be able to recover your investment if you did decide to sell.

By estimating this accurately, you should be able to make the growth of your business much easier. For example, if you own the entire building, you’ll be able to expand within this rather than having to locate and buy a new property.

However, the pressure of forecasting can be eased somewhat when renting, providing you and your business with more flexibility. If you aren’t able to predict, or you’re not confident in the market, it may be a better idea to lease. Equally, if your business looks set to expand to various different locations and it’s constantly evolving, leasing may also suit you too. It’s much less unnerving to outgrow a rental property than to buy a large space that you become financially engulfed by.

Is Buying in Your Desired Location Feasible?
To purchase a commercial property inexpensively, your best bet is to buy when there has been a downturn in the market. But, in a lot of high demand areas, you may find that this can be difficult, even when the property market does decline.

Leasing in a popular area can be much more affordable than trying to buy in an area that has seen prices booming. This is particularly the case if you have technological or security requirements in these popular areas. Renting a commercial building can help you to find the right location and premises for your business. It gives you far more flexibility and with location often being a huge factor in the success of a business, getting the right area is a must.

You may also want to consider buying in a nearby area that has a lower cost per square foot. This is particularly useful for those companies who aren’t as reliant on location to draw in their client base.

If you are able to find a property within the right location, and at a desirable price, this could be a great investment for your business. Over the long-term, you may find that the property market increases in demand, providing you with a great asset in the future.

Where is Your Cash Best Invested?
Take a look at your business and your projections for the future and ask yourself where your funds would be best placed. If you channeled them into your business, would you see a better return? Or, are you going to get a greater return if you invest the money in a commercial property?

For example, if your industry is currently experiencing increased demand and growth, you may be best investing internally and on innovation; i.e. purchasing new technology and injecting cash into training employees. Determine whether immediate capital is going to be more productive if it is used within your business or in the property. Developing your strategy and development may be more advisable if you’re experiencing times of growth and change, making leasing your most viable option.

It’s important that all of the pros and cons are weighed up before you decide whether to lease or buy a property for your business. Making the right decision could provide your company with the future success you have envisioned. Always seek professional property advice before going ahead with either option.

Eli Russell is the leasing and marketing director at JGM Properties. He's been with JGM for 14 years, and is one of the top leasing agents in Minnesota when it comes to volume of leases signed for office, warehouse, and retail space for rent or lease in Minnesota.

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