The question of whether to lease or buy is a perpetual dilemma for many business owners, and unfortunately one where a ‘one size fits all’ solution does not exist.
So how do you determine which option is best for your business? A simple approach is to start with a pros and cons list; applying them back to your specific business operation and requirements.
Let’s look at the common advantages and disadvantages of both leasing and purchasing commercial/industrial property.
THE ADVANTAGES
Control
For many business owners, having the power and flexibility to make changes and decisions regarding the property is extremely important and necessary for their operations. By purchasing your own property, you hold all the cards in terms of how best to manage the property and how you decide to operate from it.
Additionally, purchasing property allows for greater control over the cost of the real estate component of overhead – you know exactly how much you are spending each month, which provides a solid foundation on which to base business financial decisions.
Peace of Mind
You are not at the mercy of a landlord – you make the decisions on what changes are made to the property and how long you wish to stay.
A good Investment
Your property grows in value while you operate from it; thus when and if it comes time to sell, you are likely to secure a good return.
The property can also be used as a guarantee to give you access to equity when forming deals with potential clients and suppliers.
In addition, you have the ability to access tax advantages and deductions otherwise not available to those who lease property.
THE DISADVANTAGES
Finding Something Suitable
One of the biggest difficulties in purchasing commercial/industrial property is finding something suitable. There are a number of variables i.e. ideally your property needs to be situated in a good location, meet the requirements of your business operation and of course fall within your budget.
Given there are a lot of boxes to tick, in some instance it may be more viable to purchase land and undertake a design and construct project or secure a land and building package. Both allow you to build a property perfectly suited for your requirements and budget.
Lack of Flexibility
Purchasing a property means you are locked into a mortgage and thus the ability to upgrade, move or access the funds tied up in the property relies entirely on your ability to sell it.
Ongoing Costs
Owning your own property comes with ongoing costs associated with maintenance and up-keep in addition to council rates and other annual fees.
ADVANTAGES
Flexibility
Renting is a good option for those business owners that cannot yet predict the growth of their company – thus, the flexibility of renting allows you to easily move space to suit your changing needs.
Renting generally also offers a greater choice of spaces and locations.
Access to liquidity
Given you’re not locked into a mortgage, or are required to pay rates and cover maintenance costs, you have better access to liquidity.
DISADVANTAGES
Uncertainly
As a tenant, you are subject to annual rent increases and variable costs which makes it difficult to make financial business plans. Rent prices can fluctuate and you are at the mercy of the market.
In addition, if the owner decides to sell, you may be required to move quickly; causing unnecessary expense and disruption to your business operation.
Dead Money
For many, rent is viewed as ‘dead money’ whereby you are contributing to the landlord’s equity, rather than building your own asset.
Whether you buy or lease, it is crucial to have a thorough understanding of what is best suited for your business. For example, if your business is currently experiencing rapid growth – renting may be a better option; allowing you the flexibility to move when you require additional space. Alternatively, an established business may be better suited to buying in an affordable market.
Through Akura’s property development service offering; business owners and managers have the choice to lease or purchase commercial/industrial property. Our industrial units, located on the corner of Lombard Drive and Corporation Avenue, are a classic example of providing businesses with lease and buy options in prime trade centre locations.
Alternatively, for complete control over the layout and features of your business property, Akura are of course specialists in complete design and construct offerings; delivering a building specific to your needs or we can provide a land and building package.
To find out more, please contact the friendly Akura team.