Purchasing or leasing commercial real estate is a critical decision for business leaders. The right choice depends on the company’s current financial situation and where it wants to go.
If a property is located in a place that helps you grow sales through foot traffic or reduce costs through proximity to suppliers, it may make sense to purchase the building. However, leasing has some benefits if the time needs to be right to buy.
Location
The location of a commercial property is a major decision for any business. It sends customers a message about your company and can impact employees’ productivity. Choosing a location with easy access for employees and customers is important. This can be accomplished by choosing a location near highways or other major roads. Choosing a location with nearby parking and other amenities is also helpful. This allows your team to run errands during breaks and can increase the efficiency of your business.
You should also consider the zoning of the neighborhood. Depending on your business, finding a space already zoned for the type of business you want to operate may be more beneficial.
Space
Unlike residential real estate, which provides housing for families, commercial real estate Kanata is used to conduct business and earn income for its owner. This includes office buildings, retail properties, apartment complexes, and manufacturing facilities. Before signing a lease, ensure you fully understand your space requirements and negotiate accordingly. For example, be aware of how a landlord calculates rent increases or the difference between actual square footage and usable square feet. Unless you plan to start small and only need a small space, include the right to sublease your space without the landlord’s consent in your letter of intent. This will give you flexibility if your business grows or your situation changes.
Lease Term
Commercial leases are typically more complex than residential ones, with a wider range of lengths. For example, commercial leases can range from two to 15 years. Shorter-term leases are often easier for landlords to manage and provide a sense of security but may restrict landlord improvements. On the other hand, long-term leases offer tenants a semblance of stability and predictability but come with a trade-off of limited flexibility. The term of the lease can also affect the rent. Many commercial leases include terms about rent increase allotments. You must review these clauses and ensure they align with your business’s budget. You’ll want to ensure you can negotiate the most favorable terms with your potential landlord.
Amenities
Amenities are features that boost a property’s value and appeal. They can include things like location and area amenities, as well as building and tenant-specific amenities. For example, landlords often invest in shared conference space and fitness centers to attract tenants. Generally, these projects have a high up-front cost and reduce net leasable area.
In deciding between leasing and buying commercial real estate, assessing your business needs and where you want your company to go in the future is important. There is no one-size-fits-all right answer.
Security
Before a lease is drafted, the landlord and tenant should negotiate the main details in a letter of intent. This can save both groups time and money. Understanding the market is crucial to ensuring fair terms in the agreement. It is also important to know the property owner’s financial status. If they are struggling financially, it could impact your business. The direct landlord often differs from the actual building owner, so ask for information regarding the property’s ownership. Leasing commercial real estate is only for some. Some small businesses prefer to buy properties because they can receive tax breaks and gain equity. However, several other benefits to leasing property can be just as lucrative, including fewer upfront costs and more flexibility.
