Leasing commercial space sometimes has advantages over buying the space

According to the Houston Chronicle, your business's location can be crucial to both successful operations and growth. In choosing a location, one must consider a company's needs and its customers. If your business is one which draws customers to a store location, it must be: (1) convenient to visit; (2) located in a safe area; and (3) provide adequate parking. On the other hand, if you engage in manufacturing, you will want a location with quick and easy access to good means of transportation.

Business owners sometimes have to make a choice between entering into a lease for commercial space or buying a commercial property suitable for their business needs. In the long term, according to the CCIM Institute, owning your own commercial space can be more cost-effective in that it can give you a greater degree of control over your overhead expenses. For example, as noted in an article published in Inc. magazine, leasing space can cause you to be financially victimized if the landlord insists on a substantial rent increase when the lease comes up for renewal. Owning your own commercial space prevents you from being left to the tender mercies of a landlord.

Two other benefits of buying commercial space instead of leasing include: (1) taking advantage of the depreciation of the property for tax purposes and (2) over the long haul, asset appreciation. Whether or not buying commercial space is the right move for your business depends upon a thorough financial analysis which weighs the benefits of buying versus leasing.

Negatives of buying

Fits Small Business observes that, even though buying commercial space is less expensive than leasing if you plan to stay in the same location for at least seven years, there are other factors to consider that can make leasing more attractive. For example, purchasing commercial space is going to cost a lot more money upfront than leasing. Undoubtedly, you will need to put down a large initial down payment. In addition, due diligence and closing fees on commercial realty typically costs tens of thousands of dollars.

It is important to keep in mind that the upfront costs of buying commercial space will tie up a significant amount of money that could have been invested directly in your business. In addition you will find yourself responsible for building and property maintenance costs. Another point to consider is that buying commercial space could end up tying you down to a property which will not readily accommodate growth should your business flourish.

Finally, a Forbes magazine article observes that there is another factor which should give business owners pause before they purchase commercial space. Owning commercial space can increase a business owner's risk. On the one hand, owning real estate can add diversity to an investment portfolio. The problem is that many small business owners are not adequately diversified in the first place. Owning real estate can be risky since its value could plummet dramatically should the local economy be hard hit by a recession.

Seeking legal assistance

If you are considering buying commercial space for your business, you should consult with a Texas attorney experienced in handling real estate transactions. The attorney can review the purchase and sale contract and advise you of any property restrictions or zoning laws that could affect your use of the property.