Entries Tagged as 'Lease vs Buy'
Recent reports show a stark contrast in leasing trends for office space for rent in the commercial real estate market. While foreign investors appear to be making a play for prime commercial space, reportedly increasing year-over-year investments by over 83%, office construction has waned by nearly 17%. Why the sharp conflict in data?
Analysis shows that there area opportunities using tools to gain an investment advantage in the market- but this can be challenging for business investors who are focused on building clientele and daily operational management of the company.
Current and Future Space Needs
Whether the tenant will be a small operation or a larger company the basic needs are the same- efficiency, cost effectiveness, room for expansion, and strength of location. A good tenant rental representative can gather the information regarding these needs and complete an analysis upon which available locations can be ranked, investigated, and negotiated. If your company is currently housed in an inefficient space the multi-step processes necessary to keep everyone 'in the loop' can create redundancy and confusion. While a move can be costly, done correctly it can reduce future costs significantly. Would moving from your current location disrupt client service? Or are you able to make a move without affecting the product or service you provide? Then you may consider...
Thorough knowledge of the region including up-and-coming micro-markets can be the key to entering a market segment previously unconsidered. Sluggish commercial rentals have also slowed the rate of construction, so existing space becomes more appealing and potentially more negotiable. Recent reports also state that this shift in the market is creating an increase in tenant concessions and free rent, despite the increase in square foot pricing. Previously untapped commercial properties, or those that may be re-zoned to accommodate businesses, can be an ideal solution to a limitation in new construction. Repurposing of properties is a popular trend and is gaining in favor with clients as well. People tend to be drawn to the historic or recognizable- tourists included- and appreciate the visionary who takes on a forgotten space.
A volatile leasing market creates uncertainties in investing- how can you determine (or try to predict) the rate of return for your rental investment? Or reduce your potential for overpaying? Foreign investors see the potential for future profits in taking a measured risk in office investments. The leasing velocity of a space, which includes knowing historic rental values, re-leasing potential, and vacancy rates all play a role in the final dollar values. Perhaps you are feeling bound to a lease that is just not amenable to your needs, or the structure of your contract is no longer in league with the community averages? A proper representation of your needs, which may even need an overview, can leverage your remaining time in the space and perch you at a better vantage point for future negotiations. More about leasing office space vs. buying.
Due diligence is a necessary factor in renting office space and a strong real estate partner allows you to focus on your business during the negotiations of a transaction. Contact us and allow us to introduce you to the advantages of using a tentant representative while seeking rental office space for your commercial business needs.
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By: James Osgood
Buying Office Space , Lease vs Buy , Office Building Sales , Office Rental , Office Space , Tenant Representation
Business owners face an important decision when determining whether the purchase or rental of office space is best. When making this determination, a number of things need to be taken into consideration in order to make precisely the right choice.
One of the biggest factors to consider is the amount of cash that can be put out up front. Entrepreneurs must usually put out more money in the beginning whenever they are buying office space rather than leasing it. That’s because they must generally pay for appraisals and building inspections in addition to providing a down payment. Since young businesses could be struggling to come up with operating cash, many of them elect to rent office space until they have become better established.
A disadvantage to renting rather than buying is that it is easier to develop a long-term budget when buying. That’s because monthly mortgage payments tend to stay the same over the life of the loan, whereas rental costs can increase from time to time. Rent is typically based on current changes in the market, so the amount of fluctuation in a given area should be considered carefully when choosing whether to rent or buy.
Renting gives business owners greater flexibility when it comes to moving their establishment. Those who purchase office space could find themselves being unable to relocate until they are able to sell their current building. When buying commercial property, it’s important to think about the future needs of a company. That way, business owners can make sure there is ample room for expansion at their current location so that moving the establishment later is less likely to be necessary.
At Office Finder, we understand the dilemma business owners face when choosing whether to rent or buy property. We currently serve over 550 markets, and offer office space for rent or for purchase. Contact us today to find office space located in your area.
For more detailed information visit our lease vs buy page and/or click on the Lease vs Buy link below which will take you to more blog posts.
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By: James Osgood
Buying Office Space , Lease vs Buy , Office Space
So business is going strong, and now you are beginning to wonder if it’s time to stop
pouring all that office rent money into someone else’s pocket rather than
investing in office
space of your own. After all, commercial mortgage interest rates are still
quite low, and your company’s success indicates a bright future ahead. As you
consider this important shift in business strategy, here are some things to
- Is now really the time? We
ask this question not just with regard to interest rates, but also with
regard to your company’s future growth. If your business continues to
expand, will you find yourself, in another few years, running out of
office space? If you are still in a period of growth, sticking with
leasing may be preferable, because it provides more flexibility for future
expansion. You should only purchase office space if you are quite certain
that your future needs will be met by the space you purchase.
- Where do you want your
headquarters? Here we are thinking “bigger picture.” Think beyond whether
the area you are considering is a prestigious, or up-and-coming, location
for your company’s headquarters. It would be wise to do some research—and
we can help—about business trends in your city. You need to think not just
about what things are like now, but what they might be like in the future.
- Is the area of town you are considering going to be the right place for
your business in twenty, or fifty, years, not just for the next five? Will
the area’s infrastructure (roads, bridges, restaurants, etc.) meet your
needs in the years to come? If you are counting on some appreciation in
the building’s value over time, it’s important to make sure you are buying
in an area that will continue to grow.
- Is this a good financial move
for you? In addition to paying a mortgage company instead of a landlord,
you will need to factor in your upcoming capital needs and cash flow
considerations, as well as the tax consequences of making the purchase.
- Are you ready to be your own
landlord? This is a very important consideration, because when you lease
space, it’s easy to call the landlord if the toilet backs up, or expect
that the icy sidewalks will be cleared by the time you show up for work.
If you own the property, those responsibilities, and more, will now be
These are just a few of the questions that you should be considering as you
discern whether to lease or buy in this market. We have more information on lease vs. buying office space
and we suggest you contact us to conncet with on of our local pros to further discuss this exciting possibility.
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By: James Osgood
Buying Office Space , Lease vs Buy , Office Space
Small businesses face competition every day and any edge that can be gained over the huge corporate entities must be taken advantage of in order to compete effectively. For mature small businesses, there is a new way to gain a competitive edge that wasn’t even an option not very long ago.
Commercial condominiums have appeared on the real estate market recently and small businesses are taking advantage of the benefits. While this option isn’t viable for every small business, it can make a huge difference for those companies that can most benefit.
Young, immature small businesses need lots of leeway regarding office space as they grow and change. Those companies will likely move through several leased office spaces before reaching their “right size” and being ready to stay in one location and one size facility for the long haul. These are organizations that should remain in the office leasing market for some years to come.
Those small businesses that have found their “right size” and know exactly what they want and need in office space for the coming years can greatly benefit from a commercial condo. The reason to let a company mature and adjust before investing in an office condo is that it may be difficult or even impossible to obtain another condo in the same building in which to expand as the company grows. Businesses that have remained one general size for some time are best suited to investing in commercial condos for office space.
Leasing has lots of downsides. The largest, of course, is the fact that the investor who owns the office space wants to generate a profit from his or her investment. After all, that’s what owning real estate for lease is all about. Other down points include limitations on use, remodeling, even restrictions on paint and carpet color in many cases.
Investing in a commercial condo for small business office space clearly takes the “middle man” – the landlord – out of the picture entirely. The small business obtains financing directly from a mortgage lender, just as is done when a private individual purchases a place to call home. Small Business Administration guarantees also may be available to allow for a 10% down payment and favorable interest rates. If you have bought a home, you already know how much less expensive it is to make mortgage payments on a home when compared to leasing a like residence from another owner. The very same is true of office condos.
The small business becomes responsible for all repairs on the interior of the commercial condo because there is no landlord to turn to should something break or stop working. A small prudent reserve for such situations is wise on the part of any business purchasing a building, whether a condo or more traditional office space. In the case of leasing, the landlord is already charging an amount to hold toward repairs in the lease payment each month. Instead, the small business can invest the money in an interest bearing bank account for earn money on the reserve held for repairs.
The business is also responsible for payment of all taxes on the unit. Here again, the landlord of a leased office space has taken this sum into account when setting the monthly rental fee. It’s just a matter of managing your budget so that making tax payments on a timely basis will not create a hardship on the firm.
In the next post about commercial office condos, we will look into the condo association board of directors and how the small business can effectively deal with and participate in that area of commercial office condo ownership.
The Buying Process
Leasing vs Buying Comparison
Related Blog Post: Join the Emerging Trend of Office Condo Owners
Buying Office Space , Commercial Condo , Commercial Real Estate , Lease vs Buy , Office Building Sales , SBA Loan
Office space is critical to operating any type of business and many small businesses simply can’t afford to purchase a building in which to operate. Renting is, of course, a great option, but there’s no equity build up in renting – except for the landlord. With an office condominium, a small business owner can purchase office space, build equity, and even sell the office space if and when desired.
The concept of commercial condos is a rather new one. It provides the owner with more power to change the interior space to make the interior setting most conducive to their particular business. They come in all sizes and classes of buildings. Because the commercial office condo is purchased, the business owner is not going to be hit by a lease change in rental rates. There are lots of benefits to the small business such as tax advantages and residual value.
Ownership to Lease Comparison
- The lease renewal offers the landlord the chance to increase rents. Sure, rent could go down, but more often, it goes up and up over time unless the rental market is extremely soft.
- At lease end, the small business owner must either accept the new lease terms or find a new location and bear the expenses involved in moving, as well as the business disruption.
- Depending on lease language, a lease renewal might not be available if the landlord decides to sell the building.
- Much of the interior of the business office is controlled by lease language, leaving few options for the business owner for customization.
- Rent is a liability in the accounting process.
When buying a commercial condo:
- If purchased on a fixed interest rate mortgage, the payments for the property will not change over time, allowing long-term budget and financial planning.
- Some restrictions apply to use and interior change per the laws of the condominium association, but they are usually not nearly as limiting as when renting.
- There is a fee paid for upkeep and maintenance of common areas, sometimes even including common lobby assistance.
- The commercial condo becomes a business asset rather a liability.
- The office condo ownership shares, in the case of partnerships, can be legally willed to the other partners so that the business can proceed without disruption.
The Condo Association
Commercial condos, like residential condos, are operated and governed by a Condominium Association made up of condominium owners. The members operate within a set of Bylaws adopted by them and which must meet certain legal requirements. If considering the purchase of a commercial condo, it is very important to read and understand the governing documents such as the associations’ Covenants, and Conditions and Restrictions (CC&Rs). These documents outline exactly what is permitted and restrict, as well as the rights and duties of the owners of the commercial condos in the buildings. They also outline what the association can be expected to be responsible for in return for the monthly condo maintenance fee paid by each office condo owner.
We’ll be looking at more aspects of commercial condos and how they can benefit the business owner in the next updates. This concept is a great way for business to stop paying rental fees and build equity in real property while providing workspace for their operations.
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Buying Office Space , Commercial Condo , Lease vs Buy , Office Building Sales , Office Space