One of the questions we’re most often asked about commercial real estate is: “Should my company own or lease its space?” Unfortunately, there isn’t a simple and universal answer to this question.
Instead, your company’s decisions about commercial real estate should stem from your business growth strategies. The question isn’t “Should my company own or lease,” but rather, “which real estate strategy will help my company build the most possible value?”
But while each company’s situation is different, it’s still important to understand the benefits to owning a space compared to using a lease. Here are the benefits to owning space you may want to consider as you implement a comprehensive business strategy.
Running a Cost-Benefit Analysis
As mentioned earlier and again ingrained here is that all commercial real estate decision you make as a business should be with your business’s growth in mind. This means that no matter which route you end up taking – leasing or owning – you should end up choosing the strategy that is most closely aligned with your goals as a company.
That’s why it’s important to remember both leasing and owning come with potential costs and benefits.
We frequently tell our clients to look at the total cost of ownership when they project the viability of owning their own space. This doesn’t only refer to taxes and regular expenses but other (often unforeseen) costs such as IT, build-out, maintenance and more importantly capital and opportunity costs as well as cash flow strategies.
The Benefits to Owning Your Commercial Space
Provided you are happy with the overall cost-benefit analysis of owning your own space, there are a lot of benefits of ownership to consider:
- Control. When you own your own space, there are no lease terms to worry about or any relationships with landlords you have to manage. Your business is in control of its own real estate destiny. You also have greater control over your physical offices and are free to renovate and remodel as you please.
- Stability of Cash Flows. Usually payments are fixed over a longer period of time, thus eliminating costly escalations of payments and more manageable cash flow expectations.
- Equity Value. Paying expenses toward commercial real estate ownership rather than a lease helps your company to build long-term equity it otherwise wouldn’t realize under the terms of a lease.
- Flexibility. Owning your own space gives you greater leeway for a number of real estate projects that align with your business’s goals, such as managing your build-outs or even leasing part of your space to another business.
- Tax Advantages. You should speak with your accountant on tax matters but typically there are many tax advantages to owning real estate.
As with most decisions there are no one size fits all solution. The benefits of ownership are many – provided that ownership is the right strategy for your business. Be sure that your business goals align with real estate ownership and you can fully realize the value of commercial real estate ownership.