Should Your Company Own Or Lease Your Space?

Many small and medium-sized business owners that we speak to, have either considered buying or would like to look into owning the real estate they occupy. For most, the biggest challenge is beginning the process of analyzing the options – where do you begin, how much space, what can you afford, how much cash do you need, what sources of financing are available, etc.?

As a result of these discussions, we've begun to develop a program, ideally suited to help companies with 10-50 employees, determine the feasibility of owning and to evaluate the pros and cons of leasing vs. buying.

For the past five years, commercial real estate has been booming. This has made it difficult and in some cases financially unwise for smaller businesses to buy their real estate as values soared to all time highs. Beginning with the subprime crisis in August of 2007 and more significantly in the past month, real estate values have begun to level off and for the type of real estate that would appeal to most business owners (fringe core/ suburban, B-C class) values have actually started to come down.

The most significant impact on value has come as a result of the difficulty in obtaining financing for commercial real estate. In order to get started on the right foot, we've developed a network of lenders and other professionals that specialize in dealing with organizations like yours. Our first step is to introduce you to this network and work through a "financial screening" with an organization other than your current bank. This is the best way to quickly determine if the dream of owning can become a reality. Based on this initial analysis we can determine the best course of action and set goals for the near future. Once past this initial litmus test, we'll lead you through a needs analysis and determine investment criteria for your new acquisition.

Looking for property is the easy part! As our search begins, we'll cover both listed and off-market opportunities in order to find the right match. Our program is very thorough from the beginning, so that once we start looking, we have avoided and are best prepared for any challenges that we may encounter.

Owning is not for everyone. Here's a short list comparing the advantages of both owning and leasing:

Advantages of Owning:

• Opportunity to enhance your personal net worth & investment portfolio
• Mortgage interest is tax deductible
• Flexibility to expand/contract to suit your business needs rather than paying to break a lease
• Tax advantages with depreciation, expenses, property management (see your accountant)
• Control your company's rent
• Take advantage of appreciation in value over many years

Advantages of Leasing:

• Credit ratings are less scrutinized compared to buying for smaller companies, depending on the landlord's work required in a new lease
• You may have the ability to sublet if your space needs change
• No concerns about selling in a down market if moving to a new location
• Your monthly rent is typically a tax deduction as a business expense.
• Take advantage of lower lease rates in a slow market

If you are considering an ownership strategy for your company and are interested in a proactive and methodical approach to the process, please give us a call at Colliers International and we can begin the process right away.

Marc Morin, Broker

Colliers Macaulay Nicolls (Ontario) Inc., Brokerage
613-567-8050
Original Post: http://www.ottawabusinessjournal.com/293060900573408.php