Currently, the United States is seeing a historically low vacancy rate of 3.3% in industrial property markets. More and more businesses occupying properties, especially after the last few years of solid leasing momentum.
But newer businesses looking to find commercial or industrial space for their company are faced with a difficult decision: buy or lease?
In this article, we’ll tell you 5 reasons why finding an industrial property for lease is the way to go.
Keep reading to learn more.
1. You Don’t Have to Make a Down Payment
For most businesses, leasing makes the most sense when it comes to finding industrial property. One of the biggest reasons that stand out is that you don’t have to make a large down payment that comes with purchasing a property.
When you buy a commercial space with a traditional loan, you usually have to put down a sizable payment that can be anywhere from 10% to 40% of the total value of the property. This is a significant commitment for any business.
In addition, you might run into some trouble trying to qualify for a commercial real estate loan that comes with a reasonable interest rate if you can’t get approved for bank financing. The ideal commercial real estate loans have interest rates that are under 4%, but other money lenders might charge more than 10%.
On the other hand, when you lease a property, you usually only have to put down a security deposit. This is usually a fraction of what a down payment would cost. Depending on the location and owner, you’ll usually find landlords asking for a security deposit that is around one month’s rent. Some other factors that might vary include the tenant’s credit or the TI allowance.
This means that your business has a lot more capital that you can put into your business or invest in building out the property.
Whenever you are deciding between leasing or purchasing, it’s always important to factor in the cost of capital and opportunity cost that comes with investing in commercial real estate instead of your business.
2. Your Landlord Takes Care of Repairs and Maintenance
When you lease commercial space for your business, the landlord of the space will take care of general area maintenance. This can include tasks like:
- Plumbing maintenance
- Building repairs
The landlord will usually have a professional property management team that will be able to handle all of the matters for the tenant on a daily basis.
On the other hand, if you own the property, you’ll have a whole new set of issues and tasks that are not business-related. These issues can take valuable resources like time and money away. When you lease, you can focus on running your business without having to manage the property while leaving the maintenance to the professional team.
Another thing to keep in mind is that if someone damages your property, you’re liable for it. You’ll have to pay for a liability insurance policy to protect your business from lawsuits.
3. Access to More Desirable Locations
Industrial property for lease typically offers the tenant access to more desirable locations. This is because most development for industrial space has already taken place in these locations. This means that purchasing land in these areas is much more costly, which will price out most businesses.
Also, most businesses that want to own property don’t need buildings that are as large as normal multi-tenant buildings that are usually larger than 100,000 square feet. The truth is that there are not many small buildings to choose from in the commercial real estate market.
If your business is planning on purchasing land to build a building, it’s important to know that the prices are based on the idea that the buyer will build the largest building possible on the property. This is usually much bigger than a buyer will need, making it much more expensive.
Leasing property in an existing building will give businesses many more options to choose the best possible location.
4. More Room to Grow and Flexibility
Arguably the most important factor that comes with leasing industrial space is the ability to have the most flexibility possible.
If your business is young and growing, leasing makes it much easier to accommodate its growth. When you sign your lease, you can ask for expansion options that give you first rights to acquire more space in the building once it becomes available.
If you buy property, you’ll likely be limited to the size of the property as well as the zoning restrictions of the area.
Also, lease terms typically last anywhere from 3 to 10 years, which gives you significantly more flexibility than a lease that comes with a 15 to 30-year mortgage. As your business evolves, you’ll be free to move into a new space that better accommodates its needs.
If you move into a building that is already part of an existing development, it will make it much easier to lease from the management company rather than buy it from them.
5. Potential Tax Benefits
When it comes to the “buy vs. lease” decision for your business, both sides have certain tax benefits. However, the tax benefits they get are different.
When you lease, you are able to deduct several payments, including:
- Lease payments
- Property taxes
- Property insurance
- Utilities and maintenance
For more information about the tax benefits of leasing industrial property, make sure to consult a tax professional.
Find an Industrial Property for Lease
Those five reasons are just the beginning of why finding an industrial property for lease is the way to go for your business.
If you’re ready to grow your business with flexible and scalable solutions, look no further. G3 Real Estate can find you the perfect industrial property location for your business.
Contact us today at G3 Real Estate!