Sunday July 14, 2024

Lease or Buy an Office

How To Guide | October 09, 2020

Buy or lease New York commercial space?
Should your organization lease or purchase an office today? That’s an interesting question. Both owning or renting a New York office space each comes with its own set of benefits and trade offs. Before you decide on either option, be sure you carefully consider all involved factors. Here’s a quick discussion to get you thinking.

What are the upfront costs?
If you’re interested in purchasing an office space in Manhattan, be prepared to make a large upfront payment, usually between 10% and 25% of the total purchase price. Considering the high value of New York commercial real estate, this will be a considerable amount. The upfront cost of lease will always be much lower.

Opportunity costs
When your company makes a major outlay of capital to purchase commercial real estate, that money is gone. It can’t be used for operating costs, salaries, marketing, etc. If purchasing office space cripples your company financially, it is not the best decision. A long-term investment is worthless if it cripples your organization in the short term. In such cases, a different form of investment will likely serve your business much better.

Planning business expenses in the long term
Paying rent on a New York office space is indeed much cheaper in the short run, but depending on the market it can become very expensive in the future. If market trends run upward you may find yourself saddled with huge rent increases when it’s time to renegotiate your lease. Conversely, purchasing commercial real estate will lock in your payment amounts into the future, allowing you make long-term financial plans with a good idea of your overhead.

Is your organization getting larger or smaller?
If you are a young company looking to grow or an established business planning to increase your firepower, you’ll need flexibility in your commercial office space. You’ll want room to expand. Considering the expense of extra square footage in a New York office building, purchasing an office space with room to grow might be cost prohibitive. In these cases, we recommend that you lease office space, which will allow you much greater freedom to expand at the end of a lease term.

The real cost of owning goes far beyond mortgage payments
When your organization makes the decision to purchase commercial real estate, be sure to take all related costs into consideration. There will be maintenance fees, taxes, construction costs and more. Emergencies happen and you won’t be able to plan for everything. Leasing will reduce your financial liability.

Invest with care
Manhattan commercial real estate has a tremendous track record as being a great investment, but it is a complicated market. When you make the decision to invest in a commercial office space, do your homework. Some commercial investments are better than others.

Tax implications
Should your company lease space in a New York office building, all rent payments are tax deductible as business-related costs, leading to a major write-off. If you purchase office space, you will be able to make deductions on mortgage interest payments and depreciation.

Gain a complete understanding
The ultimate decision to rent or purchase New York office space is complicated to say the least. As your organization proceeds toward a final verdict, consider every factor from multiple angles and based on different outcomes. It is best to view the situation from the best-case scenario, the worst-case scenario and the expected outcome.

Take decisive action
New York Offices understands the complicated nature of selecting the right New York commercial real estate for your company. We are prepared to be your advisor and guide as you navigate the process, taking every step to ensure that you are educated and informed about every decision you make. Our goal is to place every client in the right arrangement for their business, whether leasing or purchasing is the best option.

To Lease or Buy an Office; call or click today and reach one of our dedicated office brokers who can provide you with the details relevant to your business or investment requirements.