Should You Lease Or Purchase Your Office Space?

Whether you are starting a new business or your business has begun to grow, you may wonder about moving to a larger office. This will likely raise the question of whether you should purchase or lease your new office space. There are of course, pros and cons for both choices and knowing the advantages and disadvantages of each can help you to make a more informed decision and choose the option that is best for your unique business.

Purchasing office space generally means that you can lock in your mortgage long term. This means a fixed cost as opposed to leasing which could change over the course of a few years. You also get to take advantage of some tax breaks if you decide to purchase the property instead of leasing it. In addition, owning your own office space could make you more money if you have enough additional space to perhaps rent out to other businesses. Your purchased commercial property will appreciate over time as well, and this gives you a good asset when it comes to retirement. You could sell the property for more than you paid for it and completely fund your retirement in some cases.

Of course, there are cons to purchasing office space, as well. You may be faced with unexpected financial needs in the future. If your business grows to the point that your office space is simply not enough, you may be forced to sell the property and purchase a larger one. Of course, you are going to have the upfront costs associated with the initial purchase such as appraisals and maintenance of the office space, not to mention a rather large down payment.

Leasing on the other hand, gives you the chance to get into the office space for a much lower amount of money. If there are maintenance issues, those are generally paid by the property owner so if you lease, you will not have the expenses. Also, the extra money that you have from not making a huge down payment can be used as capital to further grow your business, and leasing gives you the opportunity to focus only on running your business and not on the issues that you may face as a property owner.

However, with leasing, you may be subject to increases in your rent, which could make your office space affordable if your business is not growing as your rent increases. You will of course, not have equity in the building so you are essentially just adding to someone else’s potential retirement account.

There are other things to consider and knowing all of the ins and outs of owning versus leasing is important before you choose one over the other. You may simply have to consider your own business, what you need and what you may need in the next five years or so to determine if buying or renting is a better option. It comes down to each individual business and what they need and can afford in an office space, particularly if this is a new business start up.