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Should You Lease Or Buy Your Commercial Property?

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Estimated reading time: 2 mins

Finding suitable premises for your business is a big step. Choosing the wrong on the property can have disastrous consequences. But should you look into renting or buying a property for your business? Each has its own pros and cons. 

When deciding, take the following into account. 

Budget

Buying a building outright needs a substantial deposit as well as taking out a specialist mortgage unless you have the money to cover the entire purchase price. Sinking your money into an asset like this could be great for you in the long run as you’ll be building capital, but could limit how much money you have available to buy other business essentials such as commercial catering equipment and IT infrastructure. 

Monthly cash flow

When you negotiate a rental lease for a commercial property, that lease is usually fixed for the term of the agreement, or rises are agreed upon in advance. Mortgages tend to be based on prevailing interest rates, which can go up or down. Even a small rise could seriously affect your cash flow on a monthly basis. 

Building customization options

Your business premises may need to be customized to your specific requirements. As you grow and scale, you may need to make substantial changes that require planning permission. If you own the premises but can’t secure the permissions, then you are left with a very expensive space that isn’t working for you. 

When it comes to changes that don’t need planning permission, you can basically do as you wish in your own building, but when you’re renting, you may be restricted by what you can do, or have to spend a lot of money returning the space back to it’s the original design. 

Level of responsibility 

Renting is much less responsibility. If there are any issues with large-scale repairs, then you can call your landlord to sort it out. Running premises that you own can take a lot of time and money. 

Level of flexibility needed

As your business grows, your needs may change. Maybe you need more space or a different configuration within your premises. Or perhaps you outgrow them altogether.  If you own a building, you will have to put it up for sale and then go through the process of buying another property. This is expensive and the process could take months, even years.  When you are leasing, you simply need to wait until the end of your tenancy, buy out the remainder of your lease or negotiate yourself out of your contract if your landlord agrees. 

How to decide

Before making a decision to buy or lease, you should consult with a few different people in order to get all the information you need. These people can include an estate agent, financial adviser, and accountant. Between you, you can look at the overall financial picture of the company, your plans for the future, and the current state of the commercial property market. From there you can base your decision on sound business information.

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