Slide COMMERCIAL REAL ESTATE Lease vs. Own

Leasing Space

Advantages

  • Location – Leasing provides more options in a desired location with a variety of amenities and benefits
  • Working Capital – Ownership typically requires a substantial down- Leasing enables you to take this cash and invest in back into your business
  • Spatial Flexibility – Leasing offers more options to expand or contract
  • Additional Time – Ownership requires time and effort. Leasing allows you to allocate this time for your core business
  • Risk – Leasing provides protection against potential property depreciation

 

 

Disadvantages

  • Loss of Equity / Appreciation – You may miss an opportunity to create equity and appreciation
  • Control – Leasing space in a multi-tenant building can limit a users’s control on a variety of
  • Contractual Penalty – If you vacate the space you are still responsible for paying the rent through the lease
  • Added Value Loss – If you improve your space, all upgrades belong to the landlord following lease
  • Rent Escalation – Leasing cost can increase annually and are subject to market factors

 

Owning Space

Advantages

  • Equity / Appreciation – Equity can be built up over time as the loan is paid down and you may benefit from property
  • Rent Consistency – As an owner you are able to predict the amount of your future real estate costs
  • Control – Ownership allows you the benefit of using and operating the building according to your needs. Any improvements made to the building may improve your overall
  • Tax Advantages – You will enjoy tax advantages from interest and depreciation

 

Disadvantages

  • Lack of Flexibility – Your business may experience unexpected growth that could make your building obsolete for your
  • Management – Ownership requires allocation of time and labor for issues that are not associated with your core
  • Initial Capital Costs – In order to purchase a building, lenders require a down This initial investment could have been spent toward business needs.
  • Risk – Ownership is associated with a variety of risks, including capital costs, market activity, financing, and property value