Since the inception of modern day business operations, the professionals have remained confused on whether leasing an office is a better option or owning it. To help you resolve the confusion, we have discussed the pros and cons of both.
Advantages of leasing office space
- A business gets a chance to rent the property in a prime location. This factor becomes more important for businesses like retail or hospitality.
- Credit ratings are not as important for leasing as they are for buying a property.
- A business doesn’t have to worry about the maintenance of office space and building. The maximum maintenance associated with leasing is that of carpets and office furniture.
- The businesses also enjoy tax deduction in the form of monthly rent expenditure.
- Availability of working capital lets the business expand its operations and respond to market opportunities.
Disadvantages of leasing office space
- The leasing option is linked to annual rent increases. Also, the businesses typically have to pay higher costs when the lease expires.
- The opportunity related to equity buildup is not associated with leasing space.
- The property owner may ask the tenant to shift to another location after the lease term expires.
Advantages of buying office space
- The equity built by owning the property can be used as collateral while expanding the business.
- The additional space in the office can be used for renting purposes to generate additional income.
- The owner can make improvements as per the requirements of the business.
- The owner can also enjoy annual depreciation deduction on taxes.
- No worries related to annual rent increase.
Disadvantages of buying office space
- The regulatory and legal risks increase with property ownership
- Handling the property can be a difficult task.
- The owned office space may not be adequate to take care of growing business needs.
- Upfront costs of purchasing commercial space are higher.
Conclusion: As discussed in the above section, there are pros and cons of both buying and leasing the property space. At the end of the day, it is the business requirements that lets the owners decide what suits them best. Contact us for your leasing or sales-related real estate requirements in Washington DC.