Which is More Advantageous for My Business, Buying a Commercial Property or Leasing One?

Buying or renting your commercial premises can be a tough decision, especially if you are a relatively small business. But what is the right choice for you?

If you need to move quickly or require flexibility in your premises to contract and expand then renting may be your best option. Businesses that see fluctuation in demand may require the ability to grow and shrink in size and so renting would be a good option. Buying a commercial property may well be suited to a business that is looking for a level of stability and to benefit from an increase in value of the asset.

Buying commercial property: Buying a commercial property means that you can immediately benefit from an increase in the value of your property asset. Ownership of an office building or warehouse can add significant value to your company assets as the value of your property increases over time. You may also find that buying a commercial property makes you money on a monthly basis; often you will find that your commercial mortgage repayments are lower than the equivalent rental payments.

Fixing your property expenses so you know what is required monthly is another advantage of taking out a commercial loan to buy your business property. Removing the risks of rent variation can help with budgeting and help keep control over probably one of your company's biggest costs. Interest payments on a commercial mortgage are classified as a legitimate business expense.

Many companies buy commercial premises that are larger than they actually need. Not only does this allow for expansion of the company without moving premises but it also allows you to sublet some of the surplus space to generate valuable additional revenue.

One thing you will need to be aware of is that currently deposits sizes for a commercial property range from between 20 and at least 30 percent dependant on circumstances. So your business will require plenty of capital. One other downside could be that once the property is owned, your business will lose a certain amount of flexibility in terms of moving or expanding.

Renting commercial property: Your business capital is valuable and you may need this to pay employee wages, to buy stock or to market your business. So, renting premises rather than committing all your available cash for a purchase might be preferable for a new or growing company. In addition, a new business may not have the track record or accounts available to secure a commercial mortgage to buy a property.

Renting an office or warehouse also gives you much more flexibility to relocate your firm should the need arise. You may need to move to bigger premises as your business grows or to smaller premises if you need to control your costs. Selling commercial property can be tricky, whereas breaking a rental agreement to relocate can be much more straightforward.

Renting can also mean you do not have to face unexpected cost associated with owning a property. In general, though this is dependent on the type of lease you have, if you rent your commercial property, your landlord will generally have to foot the bill for maintenance, repairs, decoration and security costs. Renting can also help isolate the company from the affects of a property market downturn or a rise in interest rates. This is replaced however with a vulnerability to rate and rent increases.

Conclusion - To Buy or Rent? If the capital is there, you're better off buying as a building is an investment, but overall you need to think about all the points above, before coming to a final decision. Don't rush in, take your time, and think things through thoroughly before you decide.

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