As business owners approach the end of their lease, the question always looms, “Should I buy office space? Is it the right time?”
It’s always hard to gauge the right time to purchase commercial real estate, especially when the economic circumstances can be unknown. In this blog, we’ll talk you through some of the factors you should consider when looking toward your business’s future.
Money
This is the most crucial question when it comes to making a significant financial decision. Do you have the funds to spend on commercial real estate? Purchasing office space isn’t a small investment, and you’ll need enough capital for all of the following:
- Down payment
- Loan fees
- Property appraisals
- Inspections
In the short-term, a lease is far more affordable, so it’s something to consider if it may be a stretch financially for where your company is currently.
Growth
Growth should always be a consideration when you’re doing something “permanent” like buying an office space. Ask yourself, “Is it possible that the company will experience more growth, or are we at capacity? If we were to experience growth in the future, how would we handle it? What would be the next steps?”
Purchasing an office space that fits you “just right” at the moment can be challenging. What happens if you were to grow significantly in the near future? Would you be able to make it work, or would you need to rethink your entire plan? If you have the financial capability, it’s sometimes smart to purchase a property to grow into, but that’s not always feasible for every business. The capital must exist to do that, and you’ll want to have an indication that the growth will take place, so you don’t have trouble filling the property eventually.
Economy
Even in the past six months, the economy has drastically changed. The world has started working remotely, and some companies haven’t filled their offices for months due to social distancing. While office space is often necessary, make sure you look at the economic conditions and the predictability of your situation. Sometimes it may make sense to delay the decision to purchase commercial real estate if it’ll lock you into a situation you may not want to be in during poor economic conditions.
That said, by purchasing commercial real estate (instead of leasing), you’ll be able to nail down a fixed rate on the loan terms. This gives you some certainty compared to a lease where you may have to pay more on its expiration if you decide to renew. You’ll also reap tax deductions associated with the costs of owning and running commercial space in the form of mortgage interest, property taxes, and other items.
Final thoughts
It’s a big step to purchase your own office space. Still, it can make sense if you have the capital, understand your anticipated growth for the future, and are certain of how you’d proceed given any uncertain economic situations. While there isn’t necessarily a clear-cut answer, it’s great to start thinking about it as a small business owner.
Hi! We’re Josh and Jolene Baijot, the creators of this website. We’re also commercial real estate brokers in Bellingham, Washington. Thank you for taking the time to read this blog post. We appreciate your time spent on this site. You can connect with us on Facebook, Instagram, or contact us through this website.
