To Lease or to Build?

It is a big decision for an organization to decide to relocate. If time provides, businesses should carefully consider their options with an open mind, as there are many opportunities for businesses to find a location with attractive scenery and an attractive price. In this post, we'll identify the benefits of building and leasing.

Leasing Benefits

• Leaseable space is generally available providing multiple options.
• In the local market, lease rates are low and incentives from landlords are attractive.
• In a typical five-year lease, the landlord will improve and upgrade the space with additions, like, carpeting, painting, etc. 

However, this may not be enough to draw a business out of their existing space. This is especially true if the business has unique requirements for their location and operations that their space needs to accommodate. Often, businesses want to have their own signature building, as well. This was true for drug maker Teva, who recently broke ground on new offices in Overland Park, KS. 

Building Benefits

• Property values are at a point where you can buy on a per-square-foot basis cheaper than anytime recently. 
• Cost of finance is historically low and available (especially on the Small Business Administration side) for owner occupants.
• Custom design to fit the look and operations of a business or organization. 
• Opportunity for sale-leasebacks, in which the building is sold for a profit and the space is leased back to the company. 

Whether an organization decides to lease or build, the decision should be thoroughly analyzed, taking into account, future growth, capital costs, and specific tax situation.  When deciding to lease or build, a long-term outlook is necessary to determine what will be best for the business and aid the most in its success.

What is best for your organization?  Only a detailed buy vs. lease analysis can determine the answer.  Block Real Estate Services can provide the answers to help you make these decisions.

Contributing Author:

Bruce Johnson, CCIM
Vice President
Block Real Estate Services, LLC
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