Buy or rent? It’s the age old question. I am talking about renting or buying commercial property or office space for your own use, not as an investment to rent out to others.
Both paths have their advantages and disadvantages, the major ones being; you will tie capital up if you purchase your commercial property or office and you are open to fall prey to a falling market.
If you rent, you release money for your cash flow, particularly if you rent a Serviced office which negates the need for certain staff members. But with renting, there is the possibility you may miss out on a rising market.
When buying, there are also many considerations to be thought about. Buying a commercial property for your own use will usually require a minimum of a 25% deposit. And I say minimum, because commercial mortgages are getting harder and harder to obtain, with many banks, demanding deposits which are closer to the 50% mark. Combine this with the current interest rates and your monthly payments will be lower than the monthly rent on a similar property, but not appreciably so.
So, if the market for commercial property has remained stagnant or, worse, gone down, then you have tied up a substantial amount of cash for no apparent gain. However, if the market has grown then you will have realised a profit on a very sound investment.
But, we also have to take into account the use of serviced offices. Here we have numerous variables that affect the end value of the investment. With a serviced office we negate the use for a receptionist and a reception area, as this is shared with other tenants. Other non-essential office space is also shared such as board rooms, kitchens, waiting rooms etc. And, although you are charged for this, it is at a fraction of the cost of what it would be if you were the sole user.
So, all in all, there are pitfalls to be had, weather you are buying, or renting, commercial property. A close study of what you are looking for in commercial space is essential, before taking any major, lasting decisions.
