As commercial real estate brokers we get asked this question a lot, and no one ever likes the short answer: It depends. Commercial real estate, whether it be retail or industrial, is an investment and, as such, is very situational. On any given transaction there will be certain advantages to buying retail space or certain advantages to leasing. A lot of it depends on whether you are a new or established business and how much control you want. Below we outline the advantages to each side of the retail CRE coin and help answer, in long form, “Should I lease or buy retail space?”
[bctt tweet=”The age-old #CRE question, Should I #lease or buy? Here, @SVNGLL helps you decide.”]
Buying Retail Space: Pros
A main advantage for buying retail is that you continually make profit over time. Over the course of your investment the cost savings materialized are greater with buying than leasing. These include tax savings through various deductions, value realized through property appreciation and the ability to provide an income source to pay down the mortgage.
The Best Landlord
When you own your retail space you do indeed have the best landlord…you! A major benefit of buying vs. leasing is control. When you own your retail asset you do not need permission to make decisions for your property. You get to control who uses your property (tenants), how it is used, what changes or renovations should be done…anything that has to do with the property. You own it, you decide.
If It Ain’t Broke, Don’t Fix It
While some want more flexibility (see lease), retail businesses that have found the perfect location, that provides high daily traffic and perfect demographics, want the opposite…they want to stay forever. Anyone who has ever leased space knows that great locations equal higher rents and higher competition. Being able to stay put, and hopefully getting in before the market value increases, is a huge financial advantage.
Leasing Retail Space: Pros
Keep Your Cash
One of the primary benefits of leasing retail space is cash flow. That means no huge down payment eating into your budget. The typical cash expenses at the start of a lease are security deposit and first/last months rent, leaving more room for core business costs. If you are just starting a business and don’t have a lot of liquidity, leasing will always be your better option.
If It Breaks, Don’t Fix It
In most leases the tenant is not responsible for maintaining the property, or repairs for all of the things that invariably break and need fixing. If the AC in your retail space breaks, call the Property Manager. Way more fun than calling a repairman and footing the bill, right? From exterior to interior, not being financially obligated for most of your space upkeep takes a lot of strain off of your business.
Let’s Get Flexible
Flexibility is by far the largest benefit to leasing retail space. With a lease you don’t have not put a ring on it, and therefore can be super responsive to your other business needs. If you realize you need more space, or less space, you can get it. If you realize your location is not producing the traffic you were hoping for, you can find one that does. If new retail space has since been constructed, you can lease there. The CRE world is your oyster.
Need Help Deciding?
Still unsure of which way is right for you? Or, are you ready to make a decision but need to find the perfect space? Good thing we know a thing or two about leasing and buying retail space in and around Baton Rouge. We have a great team that likes to work hard and would love to talk to you, contact us today…
[bctt tweet=”Are you flexible? Do you want control? @SVNGLL helps you decide if you should #lease or buy #CRE space.”]
About Us – The team at SVN | Graham, Langlois & Legendre has over 99-years of combined experiencing helping clients across the Baton Rouge area get the most value out of their CRE investment. Contact one of them today with any questions you may have and start seeing the returns in a market that will make sure to give today, tomorrow and for the extended future. To reach us, you can call us at 225.367.1515 or you can send us a message on our website. You can also follow us on Twitter at @svngll or on Facebook.