Is it better to buy or rent commercial property?

Posted on Feb 19, 2018 04:39 PM EST
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There's no question that your chosen place of business can have a significant impact on either the success or failure of your business, so it's worth paying some serious consideration to whether it's going to a smarter option to purchase or lease your business premises.

There are various benefits and downsides to both options, so approaching the decision in terms of the overall suitability, flexibility and affordability is a good way to work out what will be the best option for your business.

Suitability

There's no point in selecting a property that doesn't suit what you need to do with it, so suitability should form your bottom line when selecting a property.

Leasing can be a great option if your requirements are relatively basic. Most commercial property owners will allow you to make some minor alterations to the premises like painting, updating signage and changing the fit-out, but they are less likely to accommodate requests for more significant changes.

When you decide to buy your business premises, you'll have a lot more control if you want to make significant changes or renovations to make the premises suit your requirements, whether it be altering the internal layout, expanding the footprint of the building or making other significant modifications.

A good place to start is by looking at the various types of commercial property for sale or lease in your preferred area to assess whether a rental could be suitable, or if you'll most likely need to purchase a property.

Flexibility

It's also important to consider how much flexibility you need.

If there's potential for your business to expand rapidly, you could quickly outgrow the premises you choose. On the other hand, you could also realize you don't need as much space as you originally anticipated, and find you're paying a premium price for space you don't need. If this is a possibility, leasing a property will give you the flexibility to either upsize or downsize as needed. However, this added flexibility also comes some downsides, because the owner has the power to increase your rent come lease renewal time, or even ask you to move out if they want to sell or redevelop the site.

By purchasing a property, you'll have the scope to alter the property to expand with your business, however it's likely to come at great expense and you'll be confined to working within the constraints of the existing premises. However, if the business can afford the added expense if you do need to expand, purchasing offers a lot more stability.

Affordability

While it would be ideal to be able to choose the best property based purely on suitability and flexibility, affordability often ends up being the deciding factor for most businesses.

Renting is always going to be the more affordable option in the short-term, because you don't need to upfront a large deposit for the property-something that is usually not possible for small businesses that are still getting established. However, if your business is more established and you do have the cash for a deposit, buying a property could have significant long-term benefits for the business as you'll have a large asset that is likely to yield some capital growth.

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