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Leasing vs buying: choosing the right real estate strategy

The first step when looking into commercial real estate is deciding between property for lease, or to buy. Here, we look at which strategy is better for you.

June 22, 2020

When looking into commercial real estate, you must first decide whether you want to opt for property for lease or property for sale. There are benefits to both buying and leasing space, depending on your intention of use for the property. The typical narrative is that buying property is the more stable option, while leasing affords you greater flexibility. Ultimately, you will need to factor in your plans for the future and your current circumstances to decide which approach will best benefit your business.

Let’s discuss the benefits and potential caveats of either option in greater detail so you can best decide which strategy best suits your needs.

Break Down Your Business Needs

Commercial real estate is a huge commitment. In the first instance, it is best to solidify your intentions for looking into commercial real estate by answering the following questions:

  •  What do you need the space for?
  • What will you need the space for in the future?

Most people will tell you that businesses—especially SMEs and start-ups—are better off leasing, and investors are better off buying. There are good reasons for this, but there are other possibilities. For instance, if you are a start-up and you buy the space you want to work out of, you may end up leasing the space to new tenants after you’ve outgrown it.

The most important thing to do at the consideration stage is to maintain a realistic mindset. Shared workspaces may benefit those just starting out, but more experienced businesses may be able to afford to buy a stable space for their company. For those who are looking to invest in property and turn a profit by leasing to tenants, buying may be the best option for you, but you should still consider all your options regardless to widen your opportunities.

Pros & Cons of Buying Commercial Real Estate

Buying commercial space can be the preferable option for more stable businesses who have capital they are looking to invest. After all, property is a valuable asset, and one that typically appreciates over time. Buying a space also means you won’t need to worry about rent increases, leases ending, or landlords in general.

On the other hand, if you plan to use the space as a business premises, buying commercial real estate puts a tangible limit on how much your business can grow. You’ll also be responsible for maintaining the property and keep track of paying taxes or other expenses associated with the space.

If you’re unsure, the best thing you can do is get advice from a property advisor. Getting expert insight from a professional makes all the difference and takes much of the guesswork out of the equation.

Pros & Cons of Leasing Commercial Real Estate

The vast majority of businesses lease property, and this is particularly advantageous for businesses that are very new. There are a few reasons for this; newly established businesses are more liable to grow suddenly, and they often need to invest their capital back into the business itself in order to keep growing.

Leasing speeds up the process of finding and moving into a new space and removes some of the risks involved depending on the terms of the lease. Furthermore, having a landlord can be extremely useful for new businesses. Companies that enjoy good relationships with their landlords can rely on them to handle any repairs or maintenance required.

The major drawback of leasing comes hand-in-hand with the increased flexibility that can make it so attractive; leases may not be renewed if a landlord has another tenant lined up. You’ll also need to budget for rent increases.

Ultimately, these concerns can be accounted for when agreeing to the lease. Make sure that you are happy with a lease and its terms before signing.

Talk to the real estate experts at JLL

Whichever path you choose, the key thing to remember is to pay close attention to all terms of purchase or lease. For further advice, talk to our experts in commercial property leasing and sales. In-depth market knowledge helps the team here at JLL find you the best property possible. Whether you’re looking to lease or buy, we streamline the process for our clients and provide comprehensive information about the property. Reach out to the JLL team today!