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Choosing between buying and leasing commercial real estate

On Behalf of | Dec 15, 2021 | Blog, Commercial Real Estate |

Business owners searching for commercial real estate space in New York City have options to choose from. Before signing an agreement, some due diligence could help decide whether to buy or lease a property.

As noted by, commercial property transactions often involve complex deal-making. A commercial real estate buyer could benefit from learning how a property’s worth fluctuates with economic factors such as taxes and inflation.

Potential development may influence a purchase decision

Commercial property purchases often involve office buildings and retail storefronts. Many transactions hinge on determining a structure’s purpose and its development potential. Acquiring real estate also allows leasing to other businesses. The cash flow from rentals could help meet mortgage and maintenance obligations.

To fulfill a particular business purpose, buyers may need permission to change a unit’s zoning or land use. If a business owner requires warehouse space, an office building modification may require a meeting with the local zoning board. Increasing occupancy may also require a zoning modification.

A lease may bring advantages

When it appears that a property requires expensive renovations, a business owner may prefer to lease rather than buy. As reported by Fast Company, leasing provides flexibility. The arrangement could allow a business to move when needed. The advantages of leasing also include tax deductions and leaving maintenance responsibilities to the landlord.

The other option, a commercial real estate purchase, could provide owners with tenants. Revenue from renting commercial units, however, may fluctuate as consumers’ buying tastes and habits change. Severe changes in the economy or marketplace could also result in commercial tenants breaking a lease agreement. Unexpected events affecting leases could require legal action to resolve.