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Is it better to rent or buy commercial real estate?

On Behalf of | Jun 17, 2024 | Real Estate |

Locations can make or break a business. Therefore, acquiring real estate can be a key consideration when starting or developing a business. Choosing an area with a lot of foot traffic for a retail shop or a facility with plenty of parking and easy access for an accounting practice can contribute to an organization’s success.

Businesses have the option of either buying or leasing real property. Which is the best solution for those in need of facilities for a new or expanding business enterprise?

Each option has pros and cons

As with many decisions related to business operations, there is no one answer that is universally better for everyone running a business. Those starting businesses with minimal capital and those adjusting to surprising growth at a business may find that renting is preferable to buying.

Rental spaces can offer more flexibility, as tenants can negotiate to upgrade the space if the business thrives. They could also potentially ask to assign the lease to another business if the company fails or expands too fast. Landlords may cover most of the practical obligations related to facility maintenance, allowing an executive or entrepreneur to focus on the business instead of its space.

Renting can provide flexibility but can also mean major expenses for a company without any equity to reward those regular payments. On the other hand, buying space can lead to ownership of a valuable resource.

Especially if a company has already proven successful, establishing equity in a property could expand the company’s portfolio of assets while reducing recurring operational costs. However, companies can overextend themselves by buying real estate and may end up locked into a facility that doesn’t truly meet their needs.

The current real estate market and the development plans for the company are some of the factors that influence the best solution when seeking to acquire real property. Regardless of whether someone hopes to purchase or rent real property, they very likely need outside support while reviewing contracts and negotiating terms.

Professional assistance can take some of the risk out of the process for the business acquiring commercial real estate. The guidance, advocacy and support of an attorney familiar with commercial real estate matters can be very valuable for owners and executives seeking facilities for a business.