Buying and leasing office space offer different advantages - bizjournals:

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Buying a property represents amuch longer-ter financial commitment than leasingt and, as such, required a realistic assessment by the potential purchaser of the company’e future prospects. Companies anticipating significanrt growth need to decide whetherr to purchase property that is large enough to accommodate growth and whether they can leas unused spaceuntil it’s needed. The potential rentalo income that leasing unused space could generate should be taken into Space is less of an issu e when leasing anoffice since, if it becomews too small the companyt has the option of not renewingt its lease.
That flexibility also can be useful if marker changes show that a move to a different locationn wouldbe advantageous. On the other hand, renters can be faced with unwelcomes disruption should the landlord decide to terminate the Purchasing requires more cash up front than The initial outlay when purchasing includesd a substantial down payment as well as the cost of inspectionsand loan-related fees and other closing costs.
The upsidde is that, in contrast with a firm that leases space, the purchasedr will own an asset that can be sold hopefully at a According to online office space referralo and information networkOfficeFinder LLC, business owners purchasing officer space can expect to make a down payment betweejn 10 percent and 25 percent of the purchased price. By comparison, the up front cost involvec in leasing a spacwe usually is limited to just acouple months’ rent. Another factor potentia l buyers should consider is the effect of the down payment on workingy capital available to financsethe company’s growth.
A number of other issues should factotr into the buying or leasing suchas taxes, maintenance costs and potential interesrt and rental rate changes. Renters, for example, usuallyh don’t have to worry about regular maintenance costs, which are normally the responsibilityt of the property owner. should they wish to make significanyt alterations to theleased space, they can do so only with the landlord’sz consent. Property owners, on the other are free to make whatevee changesthey wish.
Purchasers also have the advantag of knowing in advance what their future monthlyg loan paymentswill be, especially when they have a fixed-rate Tenants, on the othet hand, are likely to face regular increasea in rental rates and need to budget accordingly. Leasing initiallyy may look like thecheaper option, said Tim Hatlestad, presidenrt of the Certified Commerciak Investment Member Institute, but to help reach a decision, business owners should carrt out an after-tax analysis to determine what can be writteb off, as renting and buyint offer different benefits. “If everything else were then you have to look at the optionsaftedr taxes,” Hatlestad said.
“The after-tax analysis, through a numberd of measures, will tell you what costs Property owners, for example, are eligibl for deductions of property mortgage interestand depreciation, while those who leasr office space usually can deduct the full amount of the rent as a businessz expense. Jim Osgood, CEO of OfficeFinder, said the stage a busines s is in can be an important factorf in determining whether to buyor lease. A more establishes business should consider buyinvoffice space, he said, since anticipated growth is easiee to predict accurately.
A startup, on the other hand, would probablg be better to lease an as it would provids greater flexibility and fewer constraintdsto growth. “I don’t know if it’s a good idea for a startup to purchase real estatebecause there’s a lot of uncertaint about whether the business will be trulhy successful or not,” Osgood said. Osgood said businessz owners should look at three possiblescenarios — realistic and pessimistic — that pit anticipated property appreciation agains cost factors to help them reach a decision.