Should You Buy Or Let Your Company Offices?
Category Advice
Are you looking to launch a brand new business? Perhaps your small startup is getting ready to scale up. Whatever the reason, acquiring business premises is a big deal. You want to get it right the first time.
The question is, should you buy company offices or let them?
As with residential property, there are risks and benefits associated with either buying or letting company premises. Keep scrolling as we unpack some key considerations for both.
To buy or to let? That is the question...
Here are some of the major benefits and risks of buying and renting commercial property:
Benefits of buying company offices
If you plan to stay in business for a long time, have plans to expand, and you don't foresee any drastic changes happening within your business in the near future, buying premises can be advantageous. If you have the capital to purchase, it makes good financial sense.
Here are a few reasons why:
- The property will be yours, and therefore a company asset
- Owning the building gives your business operational stability and efficiency
- Purchasing frees up capital that would otherwise be allocated to monthly rent
- It could provide you with tax benefits as a business owner
- Owning the building could provide opportunities for you to sell or sublet parts of the property if you aren't using the whole office space
- Any improvements you make are for your company's benefit rather than a third party
- You have freedom to alter the premises according to your current and future needs
Some risks or downsides to consider:
- Purchasing property almost always requires a deposit, so if your business is not in a position to make a down payment, it might not be the best time to buy. Even if rapid growth is on the horizon, you will want as much capital freed up to finance that growth. Consider growing first and buying later
- Similar thought should be given to your current staff complement, and how many you hope to have once you scale up. It might be better to wait until your team expands before you purchase
- As the owner, you will incur additional expenses, including maintenance and upkeep, insurance, security, liability for damages, etc.
- The buying process can be lengthy for a commercial property, with unpredictable timelines
Benefits of letting company offices
If you aren't ready to purchase commercial property yet, renting might be a smarter move for now which could benefit your business.
Some of these benefits include:
- Lower financial risk, including lower costs upfront
- You have more flexibility as you are only held to the terms of your signed annual lease
- Since you will have fewer barriers to entry, it is usually easier and faster to secure a lease
- Maintenance costs are usually much lower for tenants
- Your business will not be locked into the kind of commitments that owning a commercial property would require
- Should you need to make a sudden move, or your business rapidly expands, you won't need to deal with the hassle of selling the premises
Some risks or downsides to consider:
- You will be held to terms and conditions that your landlord sets out in the lease, which can be restrictive
- As a tenant you may enjoy fewer legal protections, as the law tends to favour landlords
- Your landlord can decide not to renew your tenancy which will not only be disruptive but may put your business security at risk
- Moving unexpectedly can be an unforeseen expense, with the risk of damaged equipment in transit, loss of customers who are unable to find you or unwilling to travel, and inconvenience to staff who commute to work
Got questions? Chat to a professional Commercial agent today
Our team would love to discuss your business property plans with you and help you start your search. Contact one of our offices or reach out to a SAProperty.com agent near you to set up a meeting.
Author: SAProperty.com
