If you are outgrowing your office space and are looking for a new location to set up shop, you need to weigh your options. Every business owner at some point will be faced with the decision of buying their office property or leasing it. Which is right for you?
Buying Your Office Space
The initial consideration that every business owner takes into account is the cost of buying versus leasing. The upfront costs of purchasing an office space are staggering. This alone may cripple your business if you are not financially prepared to handle the expense of purchasing the property. The other issue that comes into play is a lack of flexibility. In order to grow your company, you may need more space in the future, which may mean that the office you buy may not be able to accommodate your growth in the future.
That said, there are a lot of benefits that come with purchasing the property, including financial benefits:
- The cost of your property is fixed. You will not be taken by surprise with unexpected lease increases.
- You can take advantage of tax deductions
- If you purchase a large space, you may be able to rent out that extra space. This provides you with another source of income
- The property will appreciate over time and can be sold at a profit when you choose to retire
Leasing Your Office Space
Leasing is often a more attractive option, especially for smaller or growing companies as it frees up a lot of working capital. Another benefit is that offices which are available for lease are often located in prime locations which can support you brand’s image, attract your target customers, and allow your business to grow more quickly.
Choosing to lease does come with its set of drawbacks, however. Just as purchasing a property gives the benefit of fixed costs, leasing can lead to unexpected annual rent increases. It is also not uncommon for the rent to increase again when the lease expires.
The other key drawback is that renting means no equity. Rather than reinvesting in yourself, you are putting money into someone else’s pocket with no long-term benefit to your own.
What Should You Do?
There is no clear answer as to which is going to prove to be more valuable to you. Startups and companies which are in the growth stage would likely be best served by leasing. If your company cannot afford to own property in an area of town which will likely be most profitable, then again, leasing will prove to be the most valuable option.
Purchasing is the ideal option for well-established companies who are prepared to sell the property should they experience growth or will open a new location to expand their business. Those who are considering ownership must also be prepared to work with a property management company to help tend to the property. This means an additional on-going expense.
Whichever you choose, do not make the decision sparingly. Take your time to consider your options and speak to a Saracen commercial agent, accountant or financial planner for additional advice.