If your business is rapidly growing, you might be considering moving office to a bigger space. But as part of this decision, you’ll have to think about whether you want to lease an office space or buy one. There are many pros and cons associated with both options – which are vital to look at to ensure that you’ve found the best solution for your requirements.
Choosing the most suitable office space no matter where you’re located might feel daunting. So to help guide you in the right direction, here are the top advantages and downsides of each option:
Let’s start with leasing an office space
- Less commitment – making it great for those who are planning to move office again in the future.
- All repairs and maintenance are taken care of – when you lease a property, you won’t have to worry about spending time fixing anything within it – this will be the responsibility of the landlord.
- Good location – leased office spaces typically are located in prime areas, giving businesses the opportunity to benefit from the great location.
- Affordability – it’s far more affordable to lease an office space than to purchase one – not only do you not have to pay a down payment, but you don’t have to invest a large portion of your business’ money into the purchase. This will free up capital as it’s not tied into real estate, allowing you to spend it on other aspects of your business.
- Split payments – in some cases landlords may pay for certain utilities within the building.
- You can benefit from tax deductions – when leasing an office space, you can deduct the payments from your monthly payments as it counts as a business expense.
- You won’t have any equity in the building.
- You may have to wait for repairs to be done – leading to an office space that isn’t fit for purpose.
- You’ll have to cover broker fees – if you’ve leased your office space through a broker, you’ll be expected to cover fees either annually or as a one-time fee.
- You won’t be able to customize the space.
- Throughout the years of renting, you may face variable costs – as leasing can increase when you renew.
Now onto buying an office space
- When you buy property, you’ll be able to access equity which will strengthen your buying power in the future.
- Ability to customize – when you purchase an office space, you’ll have full control over the office design. This freedom is very appealing to businesses as it allows them to create a space that fits their requirements down to a tee.
- Interest payments on your commercial office space will be tax-deductible as will depreciation.
- An additional source of revenue – you might have extra space, giving you the flexibility to rent out the space.
- Fixed costs – you won’t have to worry about variable costs, making it easier to budget exactly how much your business will spend each year.
- It will be more effort to move – if you then need a bigger space for your employees, you’ll have to deal with the whole process again.
- You’ll have to cover the cost of repairs, maintenance and monthly bills.
- Huge upfront costs – in the initial purchase, you’ll have to cover closing fees, a down payment, the purchase price and everything in between. This makes it a lot more expensive than in you were leasing a space
So, there you go! Those are the top pros and cons associated with both options. By looking at them, it’s clear to see that each side has worthy advantages and downsides that could affect their suitability.
But, at the end of the day, it’s up to you which one you choose. And it will really depend on your budget, if you want to expand your business further in the future and whether you want to customize the space so that it fits your requirements.