You’ve drawn a business plan and prepared your product or service for the market. What remains is to set up an office or commercial space and launch your business.
Before launch, however, there’s one big decision you need to make: should you buy or rent office space?
For most small business owners who’re on a shoestring budget, buying an office is out of the question – at least not right away. But if you’re in a position where buying or renting office space is possible, you might be on the fence about what to do.
Lucky for you, we’re here with expert advice. Read on to learn why renting space for your office is a smarter move.
1. Unparalleled Flexibility
When you’re choosing a location for your business, you want somewhere you can base the business for several years. Relocating a business every now and then can be detrimental to your operations. Even to customers, it’s a sign of instability, which can reduce their trust in your brand.
That being said, there are instances when it’s necessary to relocate a business. You could need to move it to another state so that you can be strategically positioned to better access your target market. Or the regulatory environment in a certain region can become unfavorable to your business, forcing you to relocate to another region with a friendlier environment.
When you’re renting a business office, you have the flexibility to move as soon as possible. Especially if you’re in a free month-to-month lease, all you need to do is give your landlord a move-out notice and start preparing for the move.
On the other hand, owning a commercial space can make relocating a business complicated. Of course, you can relocate whenever you wish, but you need the financial muscle to do so; otherwise, you’ll need to sell the property first so you can raise funds to finance the move.
And, sometimes relocating isn’t even moving to a new town or city or state. It could be switching from the fifth floor of a high-rise office tower to the ground floor where customers can easily access the business. When you’re a renter, such moves are easy.
2. Reduced Property Management Responsibilities
Buying a commercial property makes you the owner. Owning property comes with several responsibilities, including repairs and maintenance. Of course, you can hire someone to take care of these tasks, but that’s an added cost to your business.
Property ownership also comes with premises liability. If someone is injured on the premises and you’re found to be liable, you (or your business) will have to compensate them for their pain and suffering. Again, you can purchase premises liability insurance to cover this, but it’s another business expense.
Office space for rent takes most of these responsibilities and liabilities off your hands. As a business owner (employer), it’s your responsibility to maintain a safe and healthy environment for your customers and employees, but that doesn’t mean repairing and maintaining the building. Your job will be to notify the landlord.
Without these responsibilities, you can keep your business costs low. You won’t need to hire property maintenance specialists and while you’ll need to buy general liability coverage, it won’t be as costly as it would if you were the property owner.
3. Forget About the Mortgage
While buying office space means you won’t worry about rental payments, mortgage payments will keep you awake at night. The truth is most business owners who buy a business office use a commercial real estate loan.
There’s a big difference between paying rent and paying a mortgage. With rent, you can simply move out as soon as your business is unable to pay it. But if it’s a mortgaged office, you don’t have the luxury of moving out. You either find a way to pay the mortgage or the lender will start foreclosure proceedings after a couple of months of default.
Not worrying about mortgage payments or the risk of foreclosure adds to your peace of mind. Plus, when you take out a mortgage to buy an office space, you have to pay about 20 percent of the property’s cost upfront. As a small business owner with a small budget, you probably have better ways to use the money that you’ll otherwise put down as a deposit for buying the office.
4. Access Prime Spaces
You might be determined to buy a commercial space instead of renting, but depending on your financial capacity, you might not afford certain spaces. For example, if your business is a restaurant and you’re looking to buy a space in a high-end area, the cost is going to be sky-high. If you can’t afford it, you might be forced to buy a space in a less-attractive area.
When you’re renting, you can easily afford prime spaces since the cost of renting is lower than buying. If your business highly depends on a prime location and you cannot afford to make a purchase, renting is your gateway.
Is Renting Office Space Right for Your Business?
For most business owners, renting office space is a straightforward decision. However, if you have the luxury to either rent or buy, it’s important to choose an option that best suits the needs of your business.
Buying has its fair share of advantages, but for the typical small business owner, renting is almost always the better option. Renting is cheaper, has few property responsibilities, and offers great flexibility.
Subscribe to our blog for more business tips and insights.