Should You Buy or Lease Your Small Business Office Space?

By James Pointon

Office space isn’t cheap, no matter how you look at it. Leasing costs a lot of money over time, but you feel less stuck where you’re at. Buying can cost a lot of money up front, but you know your office situation is stable. There are a lot of pros and cons on both sides of the debate, and the truth is that there is no objectively correct answer. To determine whether you should buy or lease your office space, you need to ask yourself a few important questions to help you determine what’s best for your SMB.

How Long Are You Staying?

If you don’t know how long you’re staying, it’s best not to commit to anything more than a short term lease – something less than five years. If you know you’re going to be staying for a while, a lease that lasts ten or more years will be both less expensive and more secure. Don’t stop there, though. If you were to purchase the office space, would the value be equal to the lease? Consider the value and expenses of both options to determine which is more financially feasible.

What’s Your Plan for Expansion?

If you continue to see success, your SMB will grow. This means hiring more employees in most cases. What do you plan to do with them? Having more space to place more employees is important, and you need to consider how you’re going to do that. If you’d like to maintain a single office, you need to have room to expand. There’s a possibility you may outgrow an office space, and in that scenario, you’re best opting for a lease. If you want to expand by opening more offices, you might as well purchase your first office to use as a flagship location.

What Kind of Budget Are You Working With?

Office space cost is typically a major concern for most SMBs. You’re trying to keep your costs low, and your debts minimal. If you don’t have access to the capital that would allow you to purchase your office building outright, it may seem like a bad risk. If you’re working with limited funds, a long lease may be exactly what you need. Generally, office spaces that are leased to a single business for a very long period will have the lowest possible rent. You can keep the influx of capital as profit, or invest it into other areas of your business.

What is the Office Building Market Like in the Area?

If your SMB is operating out of a large city, rent is probably high enough. Office buildings may seem insurmountably expensive, and they probably are. In some cities, the property market may present you with excellent opportunities. If buildings aren’t selling well or the market is slowly climbing back up, you may be able to land an office building for a steal. With improvements and the regenerating health of the market, you may be able to sell it for more than what you paid later on down the road. If the property market is unpredictable, don’t risk it. Just pay your lease and let the ownership of the building remain as someone else’s burden.

Overall, whether you decide to buy or lease your small business office space is a big decision that shouldn’t be taken lightly. There are a lot of considerations you need to make based on the circumstance of your SMB, the current market, and your finances. It’s better to spend some time deliberating than it is to jump right in.

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James Pointon
James Pointon is an experienced blogger and a part of the team behind OpenAgent, where he works as a customer consultant, helping people navigate smoothly through the process of property selling. Personally, James enjoys learning more about real estate sector through blogs and podcasts, often while traveling.
  1. This was a very informative article that clearly details some key considerations when planning to decide whether buying office space is suitable for your company. Clearly, financial consideration is vital in this decision. I also believe that alternatives to purchasing office space, such as seat leasing, is beneficial if done through another company that provides various incentives.

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