What is Better? Commercial Leasing or Buying Real Estate Properties

If you hold a small business, you may wonder whether you should lease or buy your real estate. One of the most frequently asked questions I receive from clients as a partner and executive vice president at a commercial real estate brokerage is, “Should I buy or rent a large building?”

So, like everything else in life, my answer is, “It varies based.” After all, each option has advantages and disadvantages that must be considered.

Why do People Prefer Commercial Leasing?

• There are a few reasons why leasing a commercial property may make more sense for your company, including: 
• Your company is growing quickly, and you are unsure how quickly you will outgrow the property.
• Because market conditions are volatile, committing to a three- to five-year lease gives you more peace of mind.
• You don’t have enough money for a down payment because you don’t have enough capital.
• Your company is still in its initial stage and is still in the “building phase.” 
• Your company is new to a market, or your customer base is in a small geographic area, and the only way to avoid losing customers is to lease.
• Your needs are urgent, and you require a building within the next 30 to 60 days.

How to Make the Right Decisions? 

When looking for commercial leasing property, you may be wondering whether you should buy or lease a space. 

Location

In some markets, there are more properties available for lease than for purchase, so leasing gives businesses more options. Leasing may also allow users to dominate spaces in areas where they could not otherwise possibly afford the property.

Flexibility

Leasing can give users more flexibility if they need to contract, expand, or rearrange in the future.

Cash availability

Leasing usually necessitates less cash out of pocket than purchasing. Businesses that lease may have more funds available to invest in their products/services or open new locations.

Financing source

Some small businesses that are having difficulty obtaining traditional financing may benefit from leasing because it can be viewed as a source of financing.

Cost consistency

Leasing’s long-term occupancy costs are typically easy to estimate. Tenants are typically protected from unanticipated capital costs associated with upgrading mechanical systems, repairing the property structure, or replacing the roof.

Tax Advantages

Unlike ownership, leasing’s occupancy costs are fully deductible, including the component of rent directly attributed to the value of the land.

Focus

Leasing space allows the user to focus on its core business without being distracted by the complications of property management.

Final Verdict:

As a business owner, you must consider scenarios like these. Just as you consider your products, marketing, sales, and customers, deciding whether to own or lease can make a big difference. 

Office space, retail shops (including those within shopping malls), industrial units, workshops, warehouses, and other non-residential property are all available for lease. Devoting to commercial leasing is as considerable a financial contribution and legal agreement as purchasing a property, as there are a variety of positives and negatives to consider.