Should I lease or buy office/warehouse space?

5th Avenue
14 Mar 2022

Should I lease or buy office/warehouse space?

People are often faced with the decision of whether to buy or rent commercial real estate. Whether you rent or buy will come down to any number of reasons:

Reasons to Rent:

  • You might be able to negotiate very favourable lease terms which means renting makes more sense than buying
  • Your company is young/new, and you are just looking to establish yourself in the market
  • You might be in a certain geographic area feeding a specific customer base and you have no option but to rent or face losing customers or clients
  • Tight timing means that you need occupation in the near future, and you are unable to purchase an office or warehouse within that time
  • You simply cannot afford the deposit required or the capital commitment to purchase a premises
  • Especially true in the South African commercial market, owing to uncertain economic and political environments, people might only want to commit to a lease over a certain period versus the capital commitment of purchasing premises and the long-term nature thereof
  • Your business might be growing quickly, and you are unsure whether you will outgrow the office or warehouse in the near future so rather rent for the time being

Reasons to buy:

  • If the business goes into financial difficulty, you can fall back on the property and either sell it or you can look at sub-leasing / leasing it to tenants
  • You have complete control over the warehouse/office you own and are not subject to the rules/attitude of a landlord
  • Sometimes it’s possible to get into commercial property ownership with a smaller deposit and reliance of the small business administration
  • There may be certain tax benefits or rebates depending on your operation
  • Owning a property means you are able to potentially build long term wealth and equity
  • As you improve the property or add improved / updated infrastructure and machinery, you are building your bottom line

Whether to own or lease commercial space isn’t an easy decision for business owners. The decision will come down to company factors, economic environment, or certain financial and tax considerations.

If you have cash on hand with an established company and stable growth, purchasing property might be the way to go. However, experiencing rapid growth or operating in an uncertain environment, or simply being very new in the market, renting might be preferable.

Let 5th Avenue Properties find you your perfect property!

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