One of the cornerstone questions being asked by business establishment owners is whether to lease from a lessor or whether to buy a commercial property and conduct your company from that property ?
The answer is not as simple as it may seem. Having a property and paying up that asset may appear very tempting but it may be somewhat difficult to source such an asset. For a small business establishment owner this may well be way beyond his or her means seeing that dominant positions are held by large property owners and the premises in these locations are usually expensive .
The business owner need to thrash out his position regarding the following:
1. What must the exposure be that his/her business requires ?
2. Does he/she want prime exposure ?
3. Does he/she presume a high feet count ?
4. How close is the address of the premises to the target purchasing public of the business ?
These are all factors that has an influence on whether the business owner will acquire or rent a property. Small properties are by and large not available at prime positions for sale, since they are, as a rule, part of a large shopping centre where landlords specialize in acquiring and governing the property.
The business establishment owner broadly speaking faces a predicament whereby he/she cannot buy into a sole property for their business and broadly speaking ends up with a commercial property with his/her company together with other companies. This results that the business establishment owner need to do property management duties. Property management duties are a chapter totally on its own and call for specialized resources to do property management.
Company owners generally do not want to end up being property managers. Negotiating agreements, negotiating let fees, handling tenant queries, resolving tenant complaints, maintaining the premises, ensuring the right tenant mix, servicing the premises on a routine basis is not necessarily within the area of a retail business owner.
Preferences do after all differ and we do find that most business establishment owners would rather let then buy property. The lease amount is seen as a company expense which has substantive tax benefits. The company owner is also at leisure to relocate his/her business and not be bound by a fixed asset that cannot be moved. This has the benefit that should the demographics of a specified area change then the business owner can relocate his / her company by either negotiating with the landlord to drop the lease agreement or by waiting out the excess of the lease agreement and then not renewing for a further period.
Author Resource:
A typical commercial property to rent for retail business owners will not suit them to purchase the company premises. A typical example will be a shop to rent in Pretoria, South Africa, where tenants are, all in all, looking at office space between 50 and 100 sqm. Looking at this centre it will not make sense for a company owner to buy into. We thus conclude that it is better for a business owner to let then to purchase.
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