Pros and Cons of Leasing or Buying Commercial Property

January 14, 2013

Should You Lease or Purchase Your Office Space?

One of the most costly and most important decisions that businesses can make is how to pay for its office space. Specifically, should the business lease or purchase its office space? Since the issue is complicated, here are some things to keep in mind:

Pros and Cons of Leasing Office Space

In general, leasing is the more convenient option for businesses in need of office space. Businesses can spend less in order to use the same space and can often negotiate more favorable terms such as getting the lessor to cover a portion of the maintenance. This option also allows the business to determine fixed lease costs in advance.

However, businesses that choose to lease their office space can find it frustrating should their operations ever outgrow their office space. Any expansions and upgrades must be approved by the lessor. This can result in situations where the business is limited in its growth as its office space is inadequate but the business must stay because of the lease in force.

Pros and Cons of Purchasing Office Space

In contrast to leasing, when you own your office space you have increased control over its use. You can expand and upgrade the building so long as you remain in compliance with local regulations, while renting out unused space to other businesses in order to earn some extra revenue. Furthermore, owning the building means that any appreciation in its value goes to you and would be realized should you ever choose to sell it.

Unfortunately, purchasing office space is by far the more expensive option. Not only do you have to pay more upfront in order to take possession of the office space, but you also become responsible for the paying the maintenance fees, taxes, utilities and other costs needed to keep it in top condition.

In the end, there is no “one size fits all” solution to the question of whether you should lease or purchase your office space because the right solution depends on your business’ circumstances. A good commercial real estate agent can do much to help you explore the options available, settle on the elements that you need from your office space, and find the right building to accommodate your business. Furthermore, commercial real estate agents can also help negotiate the business transactions, handle the legal aspects of the transactions, and help prepare the building for your use.

Topics: Business Operations, Content Type

Nathan Smith

Austin Tenant Advisors

Nathan Smith is a commercial real estate advisor and owner of Austin Tenant Advisors, a local commercial real estate company that specializes ONLY in representing the best interests of business owners and companies in the search, selection, negotiation, and occupancy of office, retail, and warehouse space. Early on Nathan saw a need for business owners and companies to have the same expert advice as Landlords when it comes to leasing and purchasing commercial properties. In fact, he doesn't want to just level the playing field, he strives to educate and advise them in a way that puts them in a position of strength so that they find the best spaces and negotiate the best deals possible. Nathan graduated from Texas State University and had the opportunity to serve his Country in the Air Force Reserves. Nathan is married to Jennifer and has two children. He is also a die-hard cyclist and runner and has competed in numerous short and long distance triathlons and Ironman competitions.
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