Although some businesses start off in an entrepreneur’s garage, most successful companies need their own space. Having commercial facilities allows you to share your address for customers or install the machinery that you need to manufacture your products.
When looking for facilities, one of the first questions you will need to answer is whether you want to lease or purchase your commercial space. Which is a better option?
Sometimes, buying is a better choice
If you have an established business or already have the capital or credit necessary to invest in a commercial property, then buying could be advantageous. Instead of allocating a significant portion of your resources to rent, it will go to pay for the loan on the property, which leads to the accrual of equity.
Your company won’t need to worry about your landlord selling the property or increasing the rent. You will also have full control over what you do with the space, as landlords sometimes restrict tenants to specific uses. Of course, there are certainly risks with purchasing that sometimes make signing a lease a better option.
Leasing can be a good idea for new businesses, those that have recently grown or needed to downsize and companies considering changing the way that they operate in the next five to 10 years. Commercial leases offer more flexibility for companies that may need to further expand or reduce their operations. They also involve less risk for someone who isn’t sure that their business has long-term staying power.
Exploring the benefits and drawbacks of both leasing and purchasing commercial real estate can help you decide which approach is better for you.