Many times, business owners are caught in between whether they should buy office space or lease one instead. With many different reasons in mind, they still end up questioning what the best choice is. So we reiterate the question: To lease or not to lease office space? Let us see which amongst these options offer the better choice over the other.
It will depend upon the situation
We can try to look into situations where purchasing and leasing are beneficial. When you feel that it is less likely for you to operate in multiple locations, perhaps, owning the property is better. However, if you think long-term and you picture your business growing and expanding you will most likely need to lease space than purchase one. In this case, you are encouraged to think which amongst these two options are feasible as part of your operational choice.
Money is not the only factor in the decision
Both internal and external factors will affect your decision as to whether you should purchase or lease office space. You have to weigh in on these factors and make sure your decision is based upon what suits your business objectives best. Many times, you will think that the most attractive financial outcome will mean you will have the best decision ever made. Always, there are benefits and risks to be weighed along the way.
Consider both benefits and risks for these two options
Let us take up leasing benefits first. One benefit of choosing to lease office space is the lower capital requirements. Also, you are given flexible lease term choices that will cater to your operational requirements. Add to that, flexibility extends as to how the lease term can benefit your business’ growth in the long run. The risks include some very minor things like a potential for missing notice dates or the time with which you will pay for the lease that can result to interest on your amortisation. But of course, with proper management, you will be able to get rid of this risk.
In terms of ownership, on the other hand, you will also be enjoying benefits like the fact that as long as you continuously occupy the space, you will be able to enjoy the value that you paid for your investment. But with ownership comes a lot of risks including those that pertain to interest rate and economic risk. Potentially, the asset’s actual value can be lost over time. Of course, not to forget that there is less flexibility for growth. Also you should remember that you need some real estate expertise and the actual resources to help you reap the benefits mentioned.
You need to consider some decision drivers too
We have talked about benefits, risks, situation and finances as part of the considerations when choosing to own or lease office space. Other decision drivers include retrofit costs and all other costs required for capital outlay, projected return on investment as well as your short-term and long-term plans for your business. This can also include considerations like the actual employee headcount, labour force shifts as well as neighbourhood stability.
Financial reporting and even income tax implications are also decision drivers to consider. These decision drivers should be considered alongside business expectations. Remember too that it goes beyond just financial and operational factors. It also includes projected occupancy cost as well as the value of the real estate asset itself.
Ask yourself a few more questions before making the final decision
If you will try to assess the possibilities of owning office space, you will definitely see that doing so is the most prudent decision you will make provided you will occupy the space for a long term. This can mean great operational benefits and significant financial rewards. But of course, you also have to ask yourself a few questions that will affect the decision to purchase and will make you choose to lease office space instead.
What are the possible changes your business will undertake in the future? Will that change require more space that will make owning the building quite challenging? Will the space be flexible enough so you can expand it in case you have to make these changes? Likewise you have to ask whether excess space is feasible for renting out to other users. When you have answered these questions then you can finally make the decision.
To lease or not to lease – what is the answer?
If you are in the process of planning your business and you are quite unsure which between these two options will be the best choice you will ever make, think of the benefits of leasing office space instead of owning the space upfront. After all, you are still not so sure of how the public will accept your business in general. When you think of renting then you can start scouting for the perfect office space for lease in Toronto. Give us a call and we can help you find one that is most suited for your business needs and expectations.