Which is better – buying or renting commercial property?

Pros and cons of buying

On the plus side, you’ll have the potential to build equity in the property, since it will likely appreciate in value over the long term, making it a good investment vehicle for you. You could also benefit financially from renting your commercial property to a tenant, which would give you an extra income stream to pay for the mortgage and other expenses. Owning the property, meanwhile, means you’ll face fewer restrictions on remodeling, upgrading, and decorating the space.

On the other hand, buying a commercial property also comes with some downsides. You’ll be responsible for property maintenance, requiring you to invest your own time and money into the building. You’ll also have to pay taxes on the property, and could face financial pitfalls such as losing money if the building declines in value, you need to sell, or you cannot find a buyer.

Reasons to consider leasing a commercial property

There are many reasons to consider leasing a commercial property and whether it makes sense for your business – for instance, whether your company is expanding and you’re unsure if you’ll outgrow the property. You should also consider whether market conditions are unstable, and if committing to shorter term leases – for instance, three to five years – makes you more comfortable than overcommitting.

It can also make sense to lease if you don’t have the funds to make a down payment, for instance if you’re still in the early stages of building your company. In scenarios where you need a building immediately – for instance, in the next 30-60 days – leasing a property can be a great option, and it should also be favoured at times when lease terms are more favourable than purchasing.

Pros and cons of leasing

One of the pros of leasing is that it offers you more flexibility, meaning you’re not tied to a specific location, a certain square footage, or monthly payment for longer than the duration of the lease. It means you only require minimum property maintenance and allows you to establish your company in a location you might otherwise be able to afford.