Renting Vs Buying Business Premises: Which Is Better?

Choosing the right business premises is a crucial decision for any small or medium-sized enterprise (SME). Whether you’re running a retail store, manufacturing plant, or professional office, the location, size and type of premises you select can greatly affect your business operations. Another major consideration is whether to rent or buy the premises. Both options have their benefits and drawbacks, and your decision will depend on various factors, such as your business’ growth potential, financial health, and long-term goals.

Buying Commercial Premises

Pros

• Investment Potential: Owning your premises allows you to build equity in a tangible asset. Over time, property values often increase, providing long-term financial security and the potential for capital gains.
• Control And Customisation: When you own the property, you have full control over its design, fit-out and renovations, allowing you to adapt the space perfectly to your business’ requirements without needing a landlord’s approval.
• Tax Benefits: Owning commercial property may come with tax advantages, such as depreciation deductions and potential capital gains tax (CGT) concessions upon sale.
• Stability: You won’t have to worry about rent hikes or lease expirations, providing more long-term stability for your business operations.

Cons

• High Upfront Costs: Purchasing commercial property requires a large financial commitment upfront, including a large deposit, stamp duty, legal fees, and ongoing maintenance costs.
• Tied-Up Capital: Owning property can tie up business capital that could otherwise be used for growth, such as investing in new products, technology or staff.
• Lack Of Flexibility: If your business outgrows its premises or your location becomes less desirable, selling and relocating could be time-consuming and costly.

Leasing Commercial Premises

Pros

• Lower Initial Costs: Leasing requires less capital upfront than buying, freeing up more funds to invest in your business’ growth or operations.
• Flexibility: Leasing allows you to relocate or expand more easily, especially if your business is growing or you need to move to a more strategic location.
• Reduced Responsibility: As a tenant, you’re not responsible for major property maintenance or repairs, making it easier to manage your cashflow without unexpected building expenses.
• Potential For Prime Locations: Leasing can make it more affordable to secure a prime location for your business, which could be out of reach if you were trying to buy in the same area.

Cons

• No Equity: When you have a lease, your monthly payments help build someone else’s equity, offering no long-term financial benefit or ownership stake.
• Less Control: As a tenant, you may need to get the landlord’s approval for changes to the premises, and rent increases or lease terminations could disrupt your operations.
• Uncertainty: If the landlord decides to sell the property or raise the rent, you may need to find a new location on short notice, which could disrupt your business.

How A Broker Can Help

With the right guidance, you can make a confident, well-informed decision that positions your business for long-term success. If you’re ready to explore your options and find the solution that’s right for you, we’re here to help.

Call us today at 1300 889 743 or fill out our free online assessment form to explore the best options for you.