Whether you’re searching for your first dedicated business premises, or you’ve already been leasing an office space and are assessing your options for your firm’s next home, there are pros and cons to carefully weigh up. Fortunately, we’ve been good to you and put together this comprehensive guide to the advantages and disadvantages of leasing and buying office space for small business owners.
Whichever way you arrange office space, it is one of the most significant expenses for any business, especially start-ups or fledgling businesses with limited financial resources. Read on and let us try and solve your property conundrum to lead you down the best strategic path to meet your short and long-term goals.
The pros of leasing office space
- Get access to commercial space in prime locations
In many cases, commercial landlords own premises in high-value, prominent locations. If you want to rent an office space in a well-situated area for transport links and amenities, leasing office space is usually a cheaper option than buying a property in that kind of area outright.
- Your landlord will be responsible for its upkeep
As a tenant, you won’t be liable for any maintenance or repairs necessary to maintain the safety and security of your office. Your landlord will be wholly responsible for the property’s upkeep, allowing you to invest more of your money in growing your business.
- A flexible option if you can’t find your ‘perfect’ home
Are you struggling to find the ideal long-term office for your business? If you’re still waiting for a property with the right facilities, the right terms and the right location, leasing office space gives you short-term flexibility to move out when the dream office becomes available.
The cons of leasing office space
- You may be subject to rent reviews
The terms of your lease might subject you to annual rent reviews, which could enable your landlord to bump up the price of your rental costs – whether it’s inflationary or not – affecting your overheads.
- Your business isn’t building equity in your office space
The biggest disadvantage for leasing an office is that your business is not generating equity in the property. The rent is covering your landlord’s mortgage rather than paying for your own.
The pros of buying office space
- Benefit from fixed long-term costs
By taking out a commercial mortgage your business will be able to lock in fixed, transparent monthly costs throughout the initial term of the mortgage. This provides certainty for your overheads, allowing you to make bold decisions about investment in other areas of your business.
- Generate equity to use as collateral for business expansion
On the flip side, buying a commercial office outright allows your business to build equity in the property, which can be used in the future as collateral for expanding the business. This could mean new equipment or machinery, extending the premises or simply hiring more staff. Property owners will also know that their premises can be depreciated, helping to reduce tax liabilities.
The cons of buying office space
- Up-front capital costs
In most cases, buying office space outright means that you’ll have an empty shell to fit out. The responsibility will be on the business to cover the initial capital costs incurred for office equipment, furniture, interior design and branding, any new plumbing or electrics and IT infrastructure and so on.
- Responsible for all maintenance, repairs and refurbishments
While leaseholders have the safety net of a landlord to call upon for any necessary maintenance, repairs or upgrades, businesses that own their office will have to undertake all of this themselves.
Find high-value, low-cost office space to lease with Pall Mall Estates
Whether you’re searching for 500 sq ft or 50,000 sq ft of dedicated office space, at Pall Mall Estates we have a nationwide portfolio of commercial properties ready and waiting to be leased to you.
With excellent proximity to transport networks and industry contacts, you can choose an office space that helps you land and expand. For more information on our available premises, take a look at our available spaces here or get in touch with our experienced team here.