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Making the Right Call for Your Retail Space

March 2, 2016

Keep these factors in mind when making the decision to purchase or lease your retail space.

If you’re in the retail market and looking for commercial space you likely have a variety of options. One of the most important considerations is whether to lease or buy your retail space. This is an extremely important decision and one that should not be taken lightly. In this article, we’ll try to outline the benefits and drawbacks of both leasing and purchasing a commercial property for your business.

Factors to consider when choosing to lease or buy your retail space

The following elements may cause you to decide to purchase as opposed to lease your retail space.

  • You’re able to consider the long-term cost

While a lease may sometimes be more beneficial in terms of cash flow in the short term, a purchase is usually cheaper over the long-term.

  • You want ultimate control over the property

Are you interested in doing major renovations or additions to the property? If so, you’ll likely be better off purchasing a commercial property as opposed to leasing. When leasing you’ll need to obtain permission from your landlord for any major changes.

  • Location, location, location

For many retail businesses, location is everything. If you find a property that is for sale and not for lease, in a perfect location, it may be best to purchase to secure the property for the long term.

  • Land values are increasing in your area

If you’re in an area where you think land will increase in value, it will likely be better to own the property rather than rent it. This is especially true if you’re able to secure a good deal on the purchase price.

  • Purchasing could bring tax benefits

By purchasing a property you’re able to utilize a variety of tax benefits including interest deductions and depreciation. It’s best to check with your tax professional for details on purchasing as opposed to leasing commercial property.

On the opposite end of the spectrum, the following factors, if relevant, could lead you to consider leasing as opposed to purchasing a commercial property.

  • Your cash flow is tight

A lease may be a better option, especially in the early years, for business owners lacking significant cash flow. This is due to the fact that upfront capital outlays are usually lower with a lease compared to a purchase.

  • You want to have the ability to relocate

Renting may be more beneficial, if you’re not sure the property you’re interested in will meet your future needs.

  • You don’t want to deal with maintenance issues

With many leases, maintenance duties are the landlord’s responsibility. These can include items such as roof repairs, heating and cooling maintenance, structural issues, and plumbing repairs. If you’re not prepared to deal with these costs, leasing may be a better option for you.

  • Your company may not be approved for a mortgage

Depending on your company’s credit rating you may have difficulty being approved for a mortgage on a commercial property. While you will likely have to meet certain income restrictions to be approved for a lease, the standards are usually lower when compared to a mortgage.

  • You’re unable to find a suitable property for purchase

Even if you’re interested in purchasing a property, you may have difficulty finding an adequate location. In this case, a short-term lease may be a better option until a suitable location is found for your business.

Contact Morris Southeast Group with your commercial real estate questions

If you’re still unsure whether leasing or purchasing a retail space makes more sense for your company, don’t hesitate to contact South Florida’s leading commercial real estate brokers, Morris Southeast Group, today at 954-474-1776 x 303.

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