The decision of whether to buy or lease an office or warehouse space is one that requires serious deliberation. The wrong choice could be detrimental to the long-term success of your business. Before you jump into a commitment of any kind, here are some factors about buying and leasing commercial real estate that should be considered.
Reasons to own
If your business has enough liquid assets to justify the purchase of a commercial office or warehouse space, there are many reasons why this may be a good idea:
- Owning a building or space helps your business avoid exposure to rental increases. This will help you save money and reduce stress in the long run.
- Any real estate a business owns may be used as a long-term investment to build equity as the value appreciates.
- When it comes to occupancy expenses, owning a space allows the business owner to control a portion of the operating costs. This creates an opportunity to save more money.
- Owning a property may also offer a business a tax deferral if the asset depreciates in value.
Reasons to lease
Buying a commercial office or warehouse may not always be a feasible option for a business. In that case, there are plenty of reasons why leasing can be beneficial:
- If you are in the beginning stages of building your business, leasing frees up capital to focus on short and mid-term expenses. Staying focused in the beginning will make it possible for your business to consider big ticket purchases in the future.
- Leasing allows room for expansion. A rapidly growing business will want the flexibility of a lease when it comes time to seek out either additional space or a wholly new location.
- In the event the real estate market takes a negative turn, the repercussions of this instability are absorbed by the landlord, rather than your business.
Helpful tips
In addition to these suggestions, always remember to consider current market trends. The state of the real estate market should be a significant factor in your consideration to buy or lease a space.
In Nevada, real estate prices are rising due to a lack of inventory and an increase of businesses with available cash budgets. If your business is one with funds to buy, purchasing a commercial space versus leasing could be a wise investment.
Another trend to consider is the amount of interest you will have to pay if you purchase. Right now, interest rates are at an all-time low, but this will not last forever. As prices continue to increase, so will interest rates. Consider purchasing real estate now to lock your interest rate in at these low levels. Leases contracted while interest rates are low may be subject to a hike should rates be higher when the lease expires.
Even with extensive research, it may be difficult to fully understand the ins and outs of this complicated market. It’s always a good idea to consult a Las Vegas real estate lawyer with experience in commercial property who can guide you toward the right choice for your business. With over 30 years of experience, Marc Simon can handle virtually any real estate legal matter. For more information about this Las Vegas real estate lawyer contact 702.451.7077 or info@marcsimonlaw.com.
