Should you buy or rent your commercial office space?

By Greg Bell

Is it better to buy or lease your office space? That's a question many business owners have to face, and the truth is there's no one-size-fits-all answer. So if you're trying to decide whether to lease an office on the Gold Coast or buy one, there are here are four questions you should ask yourself to help that choice along.

How much capital do you have available?

Perhaps the largest factor to consider is how much capital you currently have to allocate towards an office. If the business has a lot of cash saved, getting a loan and putting down a deposit for purchase will be possible. The question you have to ask, however, is whether that cash could provide better returns to the business being utilised in another area. If you have debts, for example, that cost you more in interest than you can plausibly expect the property to appreciate in value, using the cash to pay those debts down might make more business sense.  

The question should be considered with your financing resources too. Your bank may be willing to lend you the amount necessary for the purchase, but would that loan be better utilised going towards other business investments? It's a question of opportunity cost and as a business owner, you'll know that's a cost you always need to take into account.

How extensively do you want to customise the space?

If you want an office that you can make structural changes to, buying a property might be your only option. Most leases don't allow for the changing of structural elements, or if they do, they would need to be undone before the lease ends – a fact that makes it prohibitively costly to do so.

That said, you may be surprised at the amount of customisation you're able to do with temporary fixtures. Walls that can be taken down and false floors can change the interior of a space dramatically, with a relatively low cost to return the space to its original configuration. In that case, a lease may be viable for your needs.

Do you expect your business headquarters to move?

The best time to buy an office space is when you expect to be in it for a long time.

Generally speaking, it's more likely a small business is going to need to expand to a larger office in a shorter time frame than a more mature one. So if you've been in business a long time, and can anticipate the space needs for the indefinite future fairly well, then purchasing a property could be a good way to go. At the very least, it can provide some diversification to your asset base as you'll be building equity with your loan repayments rather than getting no return on your money in paying a landlord.

Do you want to maintain the property yourself?

When you lease an office, maintenance of the property is the responsibility of the landlord not the tenant. If you buy on the other hand, that duty falls to you. This can give you greater flexibility and makes it easier to do things the way you want them done, but it can be a lot more work to co-ordinate if you don't stay on top of it.

Looking to buy or rent a commercial property on the Gold Coast? The expert team at Ray White Surfers Paradise can help – get in touch today!

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