Whether to buy or lease commercial property is a question that continues to come up when we talk to our clients about their objectives and strategies as a business. Typically this debate arises when property rentals have reached new heights, or when property values have adjusted downwards and purchasing a facility or office becomes a realistic consideration. Increasingly, SMEs are grappling with the buy vs. let scenario, where purchasing a business address often sounds like a good idea but never actually comes to fruition.
More than just a financial decision
For large commercial entities with multiple locations, they’ll either lease or own their commercial property depending on the strategic and operational implications involved. Most businesses look at property simply as a way to produce products or provide services. There’s more to it than that though. Ultimately, the decision should not be based solely on the financial considerations but should also include a variety of financial and operational factors beyond just the property asset and the projected costs of occupation.
The attraction of long term leases
For example, today’s market creates the opportunity to take advantage and either purchase or lock into long-term leases at favourable terms. Rentals will change as the economy recovers, concession packages will fall away and pricing will eventually escalate. Long-term control of a facility can be achieved with 5-12 years lease commitments, and flexibility can be provided in the form of expansion, contraction and renewal options.
The long term advantage of buying
Buying commercial property can certainly be a good long-term occupancy decision with significant financial reward and operational advantages. Assuming the economics of a transaction are attractive, one should consider how much will your business or space requirements will change over time. Would owning a building create significant challenges in managing those changes?
Buying vs. leasing commercial property is not only a financial decision, but is equally a risk and operational decision.
Over the past six years we have helped commercial businesses lease, purchase, develop and dispose of office and industrial buildings. If you’re looking for help in making the right operational decision regarding your commercial property, we’re here to help. Call Simon on 083 261 2861 or email email@example.com to start the conversation today.