There are a variety of factors small business owners must consider when it comes to the decision to buy or lease a commercial property.
When a business owner is in the market for a new commercial space, finding the right location is only part of the equation. Once an area or even a specific location is found, the next question may become: Do you purchase or lease the property? While you may not always have an option, it’s important to think about what works better for you as a business owner if you do.
One of the driving factors that plays a key role in the decision has to do with 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:
Impact of increasing rent and property values on commercial property
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. This is especially true if you’re able to spot an up-and-coming area prior to rising prices.
Additional reasons why it may make sense to purchase instead of lease
Aside from the impact of increasing property values, there are a number of other reasons when it makes financial sense to purchase a commercial property:
- Tax savings – While the initial outlay that is used to purchase a commercial property is not deductible, you can depreciate the cost of the property over time. In addition, if you financed the property, you may be able to receive tax deductions for any interest payments.
- You have a well-established business – If your business has been around for quite some time yet you haven’t purchased any commercial space, it may be time to look into building an asset through the purchase of real estate. Conversely, if you’re a startup, leasing may be the right option until your business is solidified.
- You want ultimate control of the property – If you’re interested in doing extensive renovations, a purchase usually 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.
- Location is critical – Another reason to purchase is if you need to get into a certain area 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 lease or buy?
Are you looking for commercial space in one of South Florida’s hot areas in Miami-Dade, Palm Beach, or Broward counties? If so, it can be difficult to know whether it makes more sense to purchase or lease. By working with a seasoned commercial real estate firm like Morris Southeast Group, you can determine what is the best move for the future of your business.
For more information on the South Florida commercial real estate market, feel free to give our office a call today at 954.474.1776, reach Ken Morris on his cell at 954.240.4400, or email kenmorris@morrissegroup.com.
Tags: commercial property, commercial real estate, lease a commercial
