Buying brings stability while leases offer flexibility - bizjournals:

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Buying a property represents amuch longer-term financial commitment than leasing and, as requires a realistic assessment by the potential purchasee of the company’s future prospects. Companies anticipatinb significant growth must decide whether to purchase property large enough to accommodate that growthuover time. If the spacee is initially too large, they might want to leaser the excess space to a tenan tfor now.
The potentiaol rental income that leasing surplus space mighy generate for the purchaser also should be part of the Space is much less of an issue when leasing an since if it becomes too small or toolarge — the company has the optionb of not renewing its lease and movinyg elsewhere. That flexibility also can be useful if market changes over time indicatw that a move to a different locationm wouldbe advantageous. On the other renters can be faced with unwelcome disruption shoulfd the landlord decide to terminatdthe lease. Deciding to purchase also commits businessw owners to a much larger upfront cash outlayy than theleasing option.
The initial outlay when purchasing will include not only a substantial down but also the cost of inspectionsand appraisals, loan-related fees and othedr closing costs. The upsid e is that, in contrast with a firm that leases thepurchaser will, in time, own an assegt that can be sold hopefully at a profit. According to onlinr office space referral and information networikOfficeFinder LLC, business owners purchasing officew space can expect to make a down payment of between 10 percent and 25 percent of the purchase price. By the upfront cost involved in leasing a space usually is limited to just a coupleof rent.
Potential buyers should also consider the effecrt of the down payment on working capital availabl to financethe company’s growth. Other issues include taxes, maintenance costs and potentiao interest and rentalrate changes. for example, usually don’t have to worry about regulae maintenance costs, as these normally are the responsibility of thepropert owner. However, should they wish to make significant alterations to theleasefd space, they can do so only with the landlord’ consent. Property owners, on the other hand, are free to make whateve changesthey wish.
Purchasers also have the advantages of knowing in advancwe what their future monthly loan paymentswill be, especially when they have negotiateds a fixed-rate loan. on the other are likely to face regulatr increases in rental rates and need tobudgett accordingly. Leasing initially may look like thecheaper option, says Tim Hatlestad, presiden of the Certified Commercial Investment Member Institute, but to help reacjh a decision, business owners should carry out an after-tac analysis to determine what can be written off, as renting and buyingv offer different benefits. “If everythinfg else were equal, then you have to look at the optionsdafter taxes,” Hatlestad says.
“The after-tax through a number of measures, will tell you what costsz less.” Property owners, for example, are eligible for deductions of property mortgage interest and depreciation amongtother things, while those who lease office space usuallty can deduct the full amount of the rent as a businesd expense. Jim Osgood, CEO of says the stage a business is at in its life cyclew can be an important factor in determining whethert to buyor lease. A more established businesss should consider buyingoffice space, he says, since anticipated growtjh is easier to predict accurately.
A startup, on the othefr hand, would probably be better to lease an as it would provide greatere flexibility and fewer constraintsto growth.