Is It Better To Buy Or Rent Commercial Property?

Categories: Property TipsPublished On: January 28th, 2022Comments Off on Is It Better To Buy Or Rent Commercial Property?

Of all the decisions a business owner has to make, deciding whether to buy commercial property or find a place to rent is one of the more difficult choices. There are plenty of benefits and drawbacks to both options, but it’s not as simple as being a preference in most cases.

A lot will depend on your business and the plans you have in place – as well as expectations for the future. Assuming all goes to plan, and you have data to back up your assumptions, you can look at a bigger picture that gives you different options.

Despite this, it’s good to know what you can expect from commercial property for rent or sale, and the team at Williams Sillitoe have pulled together the factors you can keep in mind when making a decision on your next property and location.

Is It Better To Buy Commercial Property?

When thinking about commercial property to buy, it’s important to not rush into any decisions. This is a big investment – but it is an investment, and has the potential to be a huge asset to your business. While it can take longer to complete a purchase and be able to use a commercial property compared to renting, the freedom you enjoy with it by owning it outright gives you a lot more options.

Whether your business requires a retail space, office, warehouse or another type of property, you’ll find plenty of reasons to buy commercial property, but it’s just as important to consider the cons, too.

The Advantages Of Buying Commercial Property

There are plenty of advantages to buying commercial property, meaning that despite the lengthy process and upfront cost involved, it can be a great solution. If you know that your business will benefit from being in a single location for a long period of time, or your growth won’t be measured purely in the physical space you own, you can really make use of owning a property.

As you own the property, there’s no one above you that needs to give permission when you want to make changes, or to stop you subletting part of the property if you don’t need all the space. It can also be a good way to gain more income while avoiding long leases that don’t suit how your business might evolve.

There are no more rent increases or lease negotiations to go through, as you have either bought it outright or applied for a mortgage with terms that you know in advance. This also means that each payment adds to the return you’ll receive should you sell – and if the property increases in value over the time you own, you can enjoy an even better return on your investment.

Considering The Risks Of Buying Commercial Property

While buying a commercial property on paper it looks to be a great choice, there are some drawbacks to consider. Whether these outweigh the benefits is something you should think about carefully.

The biggest obstacle many business owners face is the large deposit needed to secure the property they want. While you may be able to free up some cash from your business, this isn’t always possible and without this sum, you won’t make it far into what can be a very lengthy process to complete. You might also find variable mortgage rates, which can alter the cost you pay each month, and this can make it difficult to plan your outgoings as effectively as you might like.

While you can hope the property’s value increases over the time you own it, there is no guarantee of what it’s future value will be, and should it decrease, that’s something you’ll have to absorb and plan for when looking for your next commercial property. Other costs, such as stamp duty and legal fees, have to be taken into account, too – and any repairs and maintenance must be carried out by you (or contractors you hire) which is not only costly but time consuming.

Is commercial property for rent a better choice for your business?

While the idea of owning a property might sound appealing, it’s not always the right solution for your business – at least at certain points in time. Moving into rented property can often be quicker and allow you to find properties that best suit your needs when you’re looking.

Your business situation can change very quickly, and the flexibility offered by commercial property for rent means you can better take advantage of what your business needs as required. Like with buying, there are advantages and disadvantages, and we’ve gathered some of them below so you know what to expect.

What Makes Commercial Property To Rent The Right Option?

Renting commercial property can be a great option for many business owners compared to buying, even if your long term goal is to buy a property of your own. While each rental agreement comes with its own terms, you can find a premises that serve your needs for the stage that your business is at, and that means managing costs and maximising your investment.

When agreeing terms on a commercial property for rent, you’ll find the process goes much faster than buying, meaning you can move into the property faster and get on with running the business. You’ll also benefit from avoiding the large deposit that’s needed when looking to buy.

Should the value of the property decrease over time, you can avoid having to absorb this cost as the property value doesn’t affect you – it’s something for the business owner to handle. You can also find properties in great locations that you might not when looking to buy.

The Drawbacks Of Renting Commercial Property

On the other hand, commercial property to rent comes with cons, too. Most notable is that you’re paying someone else to use the property, which is something addressed when buying – as the mortgage payments are more valuable in your hands than in someone else’s.

It’s important to know that lease terms can be fixed amounts of time, so you could outgrow the property before the time is up, and rent increases can come at short notice. You should check your agreement carefully, as in some cases you might still be liable and responsible for repairs and their costs.

If the property you’re in increases in value, even from work you’ve been allowed to carry out and have paid for, you will see no return on the property’s value – this goes straight to the owner. If there’s work you want to do, there are restrictions you have to work with for any kind of modifications, and final say goes to the owner, even if it seems like the most obvious thing to do from your perspective.

Should You Buy Or Rent Commercial Property For Your Business?

In the end, the choice of renting or buying a commercial property will depend on your circumstances and preference. There’s a lot to consider, and what you decide will have an impact on your decision. With either option, it’s a commitment for the long term, or at least a set amount of time and this may change your business plan – or your choice will be made to fit with where you are and expect to be.

Any big changes can turn your dream property and location into something less desirable, so it’s not a decision to be taken lightly. Commercial property for rent, for example, gives you a better chance to change location on a more regular basis and in much quicker timeframes, but the stability that comes when you buy commercial property – as well as the return on your investment – can be a big boon.

With a robust business and plan, you can make the best of either situation, but don’t be shy about hearing other points of view and opinions to see if they can offer something you haven’t thought of.

Want To Know More About Buying Or Renting Commercial Property?

While the decision over whether to buy or rent a commercial property for your business will depend on your situation, there are pros and cons to both options that you need to weigh up to ensure your choice is the right one.

Our team at Williams Sillitoe can not only help you find the right commercial property for your needs, but also help you weigh up whether renting or buying is the best choice for you at this stage in your business’s life. If you’d like to know more about how we can assist your search, get in touch with our team today.