It’s one of the oldest (and most frequently asked) questions in commercial real estate: Should I buy or lease? While we hate to tell you this, there is no standard way to answer that question. In reality, it all depends on your situation. Like any commercial real estate investment, from retail space to office, your needs and wants will vary based on many factors. These include whether you are an established business, or new to market, your financing options, your growth plans/projections, your current timeline, etc. etc. Today we will focus on retail space investments. While we can’t tell you with certainty whether it’s always better to buy or lease…we can outline the advantages of buying retail space and the advantages of leasing retail space. Hopefully you can apply this information to your current situation and finally get your answer to, “Should I buy or lease?”
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The Positives of Buying Retail Space
Longevity of Investment: One of the premier advantages to buying retail space over leasing is that as an owner you will, day one, begin seeing profits. Over the term of your retail space investment you will realize value through various ways. These include greater tax deductions, property appreciation and a steady income source.
Take Control: Owning retail space comes built in with the best landlord you’ve ever had – you! A huge benefit of owning over leasing is that you are in control. No one cares more about, or for, your asset than you will. By being the owner you have the freedom to make any and all important decisions, control usage of your property (both who in the tenants and how), decide upon any and all upgrades or renovations…nothing gets done without your approval. You own – you choose.
Don’t Let a Good Thing Go: Like your mother always told you, if you find a good thing…never let it go. Some retail space seekers may want more flexibility. Although, for those businesses that have found an amazing location that has high foot traffic, repeat clientele and wonderful demographics, they want the opposite – to stay in that location as long as they can. This is where the advantage of buying comes into play. Being able to lock in a quality location that produces returns… all before the market value increases is an advantage you can’t turn away.
The Positives of Leasing Retail Space
Liquidity: When you purchase any commercial real estate asset you are required to fork over a pretty substantial amount of cash. By choosing to lease, you save yourself from this large cash down payment. This keeps your cash flow intact. In a typical retail space lease, your only expenses will be security deposit and first and last month’s rent. Doing this allows room for core business costs in your budget. This particular advantage is great for retail businesses that are just starting out and don’t have a ton of cash liquidity up front.
Being Irresponsible is Best: In most commercial leases, the tenant has no responsibility for property maintenance or repairs. If it breaks, which it inevitably will, the tenant can rest easy and throw that responsibility back to the owner. Doing so alleviates them from financial and time constraints. Moreover, this is one of the main advantages to leasing retail space over buying…it’s way more enjoyable to have someone else deal with the repair and payment of all your maintenance problems.
Flexibility: This advantage is by far the biggest check in the “Plus column” of leasing over buying. Owning a commercial real estate asset is a major investment, both for your bank account and time. When you lease retail space you don’t have to commit past a defined term, leaving you flexible to deal with the needs of growing and maintaining your business. If you find you eventually need more space? Go get it. Don’t like your location? Change it. Newly constructed retail space you want to occupy? Go for it. The possibilities are endless.
Seeking Retail Space in or around Charlotte?
If you are in the market for retail space in and around the Charlotte, NC market go ahead and give one of our Retail CRE experts a call. Whether you are unsure of buying or leasing, or simply can’t find that perfect space…our years of experience in will come to your need.
Percival Partners is one of Charlotte’s most recognized and respected commercial real estate firms with more than 50 years experience in the region. Our professional and experienced real estate Advisors are in the business of listening, understanding, and adding value. No matter the commercial property type you own or seek, you can count on the Percival Partners team to maximize your return and peace of mind. To reach us, you can call us at 704.632.1000 or follow us on Twitter at @SVNPercival, LinkedIn or Facebook.