2 Jul 2021
One of the most important and complex business decision is whether to buy or lease commercial real estate. Often it is far more difficult than buying a house. Buying or leasing a commercial property is not an easy job. There are many legalities and formalities that must be kept in mind while making a commercial property investment.
Here are some positives of both buying and leasing a commercial property to help you make the right choice:
Positives of buying commercial property
When you buy a commercial property, you are free to determine the manner of use. From changing the internal layout to making aesthetic improvements, you do not need the approval of a landlord. You have complete freedom to decide what you want to do with the site as per the developmental guidelines. Only the owner has the power to make all the decisions with regards to the property. This freedom is significant for many potential property buyers.
Just like any other asset class, your commercial property value will potentially appreciate while you operate your business from it. Capital appreciation from commercial property is generally faster than residential properties and the right property can be a lucrative investment. Alternatively, if you decide to discontinue your business or suffer from losses, you can always sell your property and make a profit.
When you buy a commercial property, you pay a fixed monthly amount towards your loan. Knowing exactly how much you’ll be spending each month provides a strong basis on which to base your business’ financial decisions. You can apportion your profits to cover the EMI and ensure that to complete your payment towards the loan on time.
Positives of leasing commercial property
Leasing a commercial property has plenty of advantages, the most important of which is having the flexibility to change and adapt far more quickly than if you own the property. As you are not invested in the property, you can easily move to a new location without worrying about putting your commercial property on the market. Additionally, as your business grows in size, you may find the need to move to bigger premises. Leasing a property allows you this flexibility as well.
Liquidity of funds
Availability of liquid funds can be extremely beneficial to a business. Furthermore, it’s a great advantage for businesses to be able to respond quickly to changes in the competitive environment be open to fresh opportunities as and when they arise. Leasing allows business owners to react much faster as doesn’t tie up as much as much of their cash, so they can do other things with their business. For instance, if you want to open more retail outlets in a short period, you can’t do so easily, if you’re buying each property.
While leasing a property the occupier has to only consider the operational cost. Over a period of time there might be a requirement of capital expenditure to renovate or refurbish the property which can call for huge amount of capital expenditure which is to be funded by the owner and not the occupier. Hence a lot people also consider this aspect while opting for a lease of the property.
Thus, both buying and leasing property have their own advantages. A business needs to evaluate its capital, cash flow as well and short and long-term growth strategies and make a choice between the buying and leasing option. Engaging a good commercial real estate consultant can help you make the right choice. We at Citadel can provide you valuable insights to help you in your decision to lease or buy the commercial property.