1.
Re: Is buying or leasing office space the way to go? Jul 30, 2009 1:52 PM
Buying or leasing office space
Sooner or later, every business has to consider whether it is better off owning or leasing office space. But here are some elements that most small businesses take into account.
The cash outlay factor:
Generally, you don't need to put out as much money upfront when you lease as you do when you buy. A quick example: A real-estate agent is looking to sell a $500,000 commercial property. Someone leasing the space might pay around $4,000 monthly in rent. Someone looking to buy the building would have to put about $150,000 down, and also would have had to pay for an
leases also have a clause allowing for an annual cost increase tied to changes in the Consumer Price Index or some other measure.
The growth factor: Buying a building that's just the right size for you now can look attractive. But what will you do if your business and your space requirement grows over the next few years?
Outgrowing a space doesn't have to be a financial crisis. One wholesaler I know saw his business increase so much in five years that he needed more than twice the space of the building he'd purchased. He was able to lease out the building at a profit, and moved his own business into a new, larger space.
Still, growing out of a place you own can involve more upheaval than growing out of a leased space. Sometimes a growing business can avoid the cost and hassle of moving by simply leasing more space in the building it occupies. That's not an option when you own a building unless you're only occupying part of it and can terminate the lease of another tenant.
