In an economic climate of business uncertainty and risk, it is particularly important that the correct decisions are made when committing funds. When it comes to selecting space, finding a desirable site can be difficult enough on its own without having to decide whether to lease or purchase the premises. Rent or buy: each comes with its unique set of expenses and advantages, which should be considered along with an enterprise’s growth ambitions and the foreseeable economic state. Locally, because of subdued confidence and energy grid constraints, business owners have been cautious of investing significant amounts in property purchases. At the same time, some are taking advantage of the comparatively low interest rates and opting for the security of owning their premises. One of the cornerstones of commercial success, after all, is stability.
Below are further reasons to take the ownership route:
- Paying towards own investment – payments made or funds invested over the course of operations go directly towards securing the future of the enterprise. In addition, in the case of buy-to-let, a steady rental income stream can be created from tenant occupancy.
- Property customisation at will – for example, an extension of space. Rather than having to expend time on an approval process with the landlord, modifications to the premises can be done quickly and as needed. This element of adaptability could mean the difference between failure and success of any potential project.
- Financial benefits – property appreciation, direct control over the estate’s operating expenses and how the premises are used.
The advantages of the leasing route:
- Greater flexibility – not committing significant sums in fixed, immoveable assets means relocating to new premises is much easier (such as in the event of downsizing or accommodating growth). It is worth reiterating that the property sale process can consume substantial time and money that would otherwise be better spent elsewhere.
- Property maintenance and management – in renting, this is handled by an external party, which means time and funds are freed up for reinvestment into the enterprise.
All in all, when searching for business premises and deciding on the level of exposure to the commercial property market, questions around affordability – rates, costs, taxes – siting, expansion plans, and the mood of the economy need to be clearly thought out. These fluctuate by the year, so that changes in the market value of a property and its rental returns should be budgeted for. Each business has unique requirements, but all would be well served by an examination of market cycles which influence the outcome of the choice “Rent or buy?”