Buying or leasing a commercial space is an important step in the lifecycle of any business, big or small, so it’s important to carefully consider which is the right option for you and your team. This is a complex situation that many business owners will find themselves in at some stage along their journey of building a business. Being such a difficult scenario, particularly in a market such as Brisbane that has been oversupplied with space for years, there are many factors that need to be considered and questions answered such as;
- Are we growing or looking to preserve wealth?
- Do we want to lock in a strategic location?
- Have we/will we outgrow our current space?
To effectively tackle these dilemmas head-on you must first have a thorough understanding of both the current business situation and long-term goals of the business. The typical narrative is that buying property is the more stable long-term option, while leasing will afford greater flexibility. Ultimately, you will need to factor in your plans for the future as well as your current circumstances to decide which approach will benefit your business most.
It is important in this stage that a considered mindset grounded in reality is maintained. For the purpose of this article, we will be focussing on why leasing may be the best choice for you.
Whilst there are certain advantages in buying an office space, such as the benefits of utilising a Self Managed Super Fund, there are a number of limitations to consider. In buying an office space through an individual’s SMSF, typically a director of a company, then allows that individual to lease their newly acquired asset back to their own business. This may have some personal benefits and can actually insure the business to a degree if it ever needs rent relief, however, a most common concern is that there is a significant drop off in quality of Strata-Titled buildings that are set up to be split and sold in this way. As these towers are run through a body-corporate, any building works that are required may be left undone as the body corporate is unable to convince the entire cabal of owners to “buy-in” to the expenditure. This will leave these buildings appearing run down, as opposed to buildings available for lease on the active market that are constantly, day-by-day, measuring themselves against the competition and fighting for new tenants. This competition drives re-investment and keeps buildings fresh and competitive.
This plays into a number of the additional benefits of pursuing leasing options.
For many businesses one of the primary benefits of leasing is that it doesn’t unnecessarily tie up CASH. Given current market conditions building owners are having to be increasingly creative in how they present their space – a large portion of this has been spec fit outs. These brand new fit outs have made access into leasing options even slicker, against the alternative of buying a tenancy and having to design and fund a fit out for your own business. A fit out can cost up to $1,000/sqm and is not typically something that you can take with you – once it’s had its run, it has to be removed. Yes, there are certain benefits of being able to depreciate the fit out, but that is outweighed easily when there are leasing options available which allow a business to walk in and begin operating. On a separate note, a further benefit is that cash will be available for investment back into the ongoing growth of the business. This becomes further relevant when consideration is given to the reality that debt would likely have to be incurred to purchase a space.
Another factor for a growing business to consider is FLEXIBILITY. As a business expands it gets more and more difficult to plan around staff numbers and what the business’s office needs to look like. Leasing options can mitigate a portion of this risk in a couple of ways – firstly, a business could just agree a shorter lease term. Off the bat this reduces the time that the business is committed to the particular space and it will sooner be able to alter its premises if it’s no longer suitable. Secondly, again, a product of a tenant-favourable market, building owners will look to “incubate” and grow their tenants where possible. As such, a business committed to a building may have further options beyond their current space and a proactive landlord will help them to grow within the building multiple times, rather than the business having to uproot and relocate time and again as may be necessitated if they didn’t buy the right sized space at the outset.
A final consideration, which happens to be one of the most important, is that leasing a commercial space will allow a sole focus on the growth and development of your business. Having to split your attention between your core business and the upkeep/maintenance of a commercial property is an added stress that is often unnecessary when your time could be better spent defining brand vision and continuing to achieve long-term business goals. You are a professional within your business, and the time wasting and potential cost benefit of also being a property professional could be detrimental to your core offering.
For more information on the different options available and what will work best for you and your business, please contact Caden Office Leasing on email@example.com or call us on 07 3014 5406 to speak to one of our leasing agents.