Are You on the Fence? Buying vs. Leasing Commercial Property

In the realm of business, the decision to either lease or buy commercial property is a crucial one, often carrying significant implications for the future of the enterprise. Both options come with their own set of advantages and drawbacks, making it essential for entrepreneurs and business owners to carefully evaluate their specific circumstances, needs, and goals before making a choice.

Let’s explore the pros and cons of leasing versus buying commercial property to help you make an informed decision.

Photo by Pixabay: https://www.pexels.com/photo/white-15120-building-269077/

Leasing Commercial Property

Pros:

1. Lower Initial Costs: Leasing typically requires less upfront capital compared to purchasing property. Instead of a hefty down payment, lessees usually pay a security deposit and the first month’s rent.
2. Flexibility: Leasing offers businesses the flexibility to adapt to changing needs. If your business experiences growth or contraction, it’s easier to adjust your space requirements when leasing, either by expanding into additional units or downsizing.
3. Reduced Responsibilities: Maintenance and repair responsibilities often fall on the landlord when leasing commercial property. This can alleviate some of the burdens associated with property ownership, allowing business owners to focus on core operations.
4. Location Options: Leasing provides access to prime locations that may be financially out of reach for purchasing. This can be advantageous for businesses looking to establish a presence in high-traffic areas or “destination” areas without the commitment of ownership.

Cons:

1. Limited Control: As a Tenant, you have limited control over the property. Renovations or alterations most likely require Landlord approval, and lease terms may restrict certain activities or changes to the space.
2. No Equity Building: Unlike buying property, leasing does not offer the opportunity to build equity. Monthly lease payments contribute solely to occupancy costs without any long-term asset accumulation.
3. Rental Increases: Lease agreements typically include provisions for rent escalation over time. While this allows Landlords to keep up with market trends and increased costs due to economic fluctuations, it can lead to increased occupancy costs for tenants, affecting long-term financial planning.

Image by Tumisu from Pixabay

Buying Commercial Property

Pros:

1. Ownership and Equity: Purchasing commercial property allows businesses to build equity over time. Property ownership can serve as a long-term investment, potentially yielding returns through appreciation and equity buildup.
2. Control and Customization: Property ownership grants full control over the space, enabling businesses to customize and modify the property according to their needs without seeking landlord approval.
3. Stable Costs: With a fixed-rate mortgage, businesses can enjoy stable occupancy costs, unaffected by fluctuating rental rates. This predictability can facilitate better financial planning and budgeting.
4. Potential Rental Income: Owning commercial property provides the opportunity to generate additional income by leasing out unused space to other businesses or tenants, thereby diversifying revenue streams.

Cons:

1. High Initial Costs: Buying commercial property entails substantial upfront costs, including down payments, closing costs, and potential property improvements. This can be a barrier to entry for some businesses, particularly startups or small enterprises.
2. Maintenance Responsibilities: Property ownership comes with maintenance and repair responsibilities. Businesses must allocate resources for upkeep, repairs, and property management, which affects the bottom line.
3. Limited Flexibility: Unlike leasing, owning commercial property ties your business to a specific location. Relocating or expansion needs may involve selling the property, which can be time-consuming and costly.
4. Market Risk: Property values are subject to market fluctuations, and economic downturns can impact property appreciation and rental demand, potentially affecting the property’s investment value.

Image by Foundry Co from Pixabay

When it all comes down to it, there is no one-size-fits-all answer. Each option presents its own set of advantages and disadvantages, and the decision ultimately hinges on factors such as financial resources, business objectives, and long-term strategy.

By carefully evaluating the pros and cons outlined above and considering your unique circumstances, you can make an informed choice that aligns with your business goals and aspirations. Whether leasing or buying, the key is to approach the decision with thorough research and foresight to ensure a sound investment in the future of your business.

We’re eager to connect and dive deep into your vision for commercial property leasing or purchasing. Let’s explore your long-term goals together and leverage our expertise to analyze data, conduct research, and identify tailored options that fit your needs. As locals deeply rooted in this community, we’re not just passionate about the area—we live and breathe it. Count on us to bring our local insights and dedication to your real estate endeavors, ensuring a seamless journey toward your objectives.

Navigating Tax Considerations for Commercial Property Owners in 2024

Subscribe to continue reading

Subscribe to get access to the rest of this post and other subscriber-only content.

Already a subscriber?

The Hot Topic: How Hiking Interest Rates Are Shaping Commercial Real Estate

Commercial real estate has been a go-to investment for individuals, institutions, and corporations looking to diversify their portfolios and generate steady returns.

Like anything else, the commercial real estate market is not immune to external economic factors, and one of the most significant factors that can throw things off-kilter is interest rates. As interest rates rise, the commercial real estate landscape experiences a series of profound effects that can impact investors, property owners, and the market as a whole. In this post, we’ll dive into the various ways in which rising interest rates can rock the world of commercial real estate.

Borrowing Costs Go Through the Roof

As interest rates climb, the cost of borrowing for commercial real estate shoots up too. This can make it more expensive to finance loans for property acquisition or development, putting a damper on new investments and making it more challenging for existing property owners to refinance their debt. The higher borrowing costs can lead to reduced property valuations and limit the profitability of real estate projects, potentially slowing down the market.

Property Values Take a Hit

Higher interest rates tend to lower property values because the higher cost of borrowing reduces the demand for commercial real estate. As the pool of potential buyers or renters shrinks, sellers may have to lower their asking prices to attract buyers or tenants. This decline in property values can have a cascading effect on the overall market, leading to lower returns for investors and causing concerns among property owners. Let’s look at today’s average rates, courtesy of StackSource.com:

Net Operating Income Gets a Squeeze

Rising interest rates can affect the net operating income (NOI) of commercial properties. When property owners face higher mortgage payments due to increased interest rates, it can put pressure on their cash flows. As a result, property owners may have to increase rents to maintain their profit margins, which can be challenging if the local market is not conducive to higher rental rates. This can create a delicate balancing act for property owners and investors.

Investors Reassess Their Game Plan

In a rising interest rate environment, investors often reassess their portfolio allocations. With the expectation of lower returns and increased borrowing costs in the commercial real estate sector, some may shift their investments to other asset classes that offer more attractive risk-adjusted returns. This shift in investor preferences can lead to reduced demand in the commercial real estate market and further impact property values.

Property Types Are Not Created Equal

Different types of commercial real estate may be affected differently by rising interest rates. For example, the impact on office and retail properties may be more significant than on industrial or multi-family properties. The demand for office space, for instance, may decrease as businesses cut back on real estate expenses in response to higher interest rates, and let’s not forget that many companies are still allowing remote work and/or hybrid schedules for their workforces. Understanding how rising rates affect specific property types is crucial for investors and property owners to make informed decisions.

The effects of rising interest rates on commercial real estate are far-reaching and complex. While higher rates can lead to increased borrowing costs, reduced property values, and shifting investor preferences, they may not necessarily spell doom for the market. Investors and property owners who keep themselves informed and adapt to changing economic conditions can still find opportunities in the commercial real estate sector. Strategies like selecting the right property types and adjusting financing options to mitigate the impact of rising rates can help navigate the challenges posed by changing interest rates. Ultimately, commercial real estate, like any investment, requires careful planning and risk management to thrive in a dynamic economic environment.

Looking for direction?

Call us today at (610) 444-7770 and let’s walk through your property investing goals, assess your risk factors, and articulate a plan that makes sense for the long game.

The Crucial Role of a Local Commercial Real Estate Brokerage

Introduction

In today’s competitive business landscape, choosing the right commercial real estate brokerage can make all the difference between a successful venture and a missed opportunity. While there are numerous options available, opting for a local commercial real estate brokerage brings numerous advantages that go beyond convenience. In this blog post, we will explore the importance of selecting a local brokerage and how it can positively impact your commercial real estate endeavors.

1. Deep Understanding of the Local Market

One of the most significant advantages of working with a local commercial real estate brokerage is their in-depth knowledge of the local market. Local brokers possess valuable insights and a comprehensive understanding of the local business environment, including market trends, rental rates, zoning regulations, and economic developments. This knowledge helps them identify the best opportunities and tailor solutions specific to your needs, giving you a competitive edge.

2. Extensive Network and Relationships

Established local commercial real estate brokerages have an extensive network of industry professionals, including property owners, developers, investors, and other key stakeholders. These connections provide them with access to a broader range of available properties, off-market opportunities, and potential buyers or tenants. By leveraging their relationships, local brokers can effectively match your requirements with suitable properties, ensuring you have access to the best options available.

3. Local Expertise in Regulations and Zoning

Navigating the complex world of regulations and zoning is essential when it comes to commercial real estate. Local commercial real estate brokerages possess a thorough understanding of the local regulations, zoning codes, and permit processes. This expertise helps them guide clients through the intricacies of compliance, ensuring a smooth and efficient transaction. Whether it’s obtaining permits, understanding environmental considerations, or analyzing the impact of zoning changes, local brokers are well-versed in the local rules and can help you make informed decisions.

4. Personalized Service and Attention

Choosing a local commercial real estate brokerage means you are more likely to receive personalized attention and dedicated service. Local brokers have a vested interest in the success of their clients, as their reputation and success are closely tied to their local community. They take the time to understand your specific goals and tailor their strategies accordingly. This personalized approach fosters strong client relationships built on trust, ensuring that your needs are prioritized throughout the entire process.

5. Local Market Insights and Forecasting

Staying ahead of market trends and predicting future developments is crucial for making informed real estate decisions. Local commercial real estate brokerages closely monitor the local market, keeping abreast of changes, new developments, and emerging opportunities. Their insights and forecasting capabilities help clients make proactive decisions, seize advantageous opportunities, and avoid potential pitfalls.

Conclusion

When it comes to commercial real estate, choosing a local brokerage offers numerous benefits that can significantly impact your success. Their deep understanding of the local market, extensive network, expertise in regulations, personalized service, and local market insights make them invaluable partners. Whether you are leasing, buying, or selling commercial property, partnering with a local commercial real estate brokerage ensures that you have the knowledge, support, and connections needed to achieve your goals. So, before embarking on your next commercial real estate venture, consider the importance of going local. Beiler-Campbell Realtors – Commercial Division your local Full-Service Commercial Brokerage. This year we celebrate 50 years of serving our communities with excellence. Let’s talk about your Commercial Real Estate goals – call us today at (610) 444-7770 and give us the privilege of partnering with you and providing you with impeccable service.

What is a NNN Lease Investment?

First, what exactly is a triple-net lease? Well, it’s a type of commercial lease where the tenant takes on responsibility for not only the rent but also property taxes, insurance, and maintenance costs. So in an investment situation, essentially, the property owner gets a hassle-free income stream, making it an attractive option for investors.

Here’s why I’m buzzing about triple net lease purchasing:

• 

• 

• 

• 

• 

1️⃣ Passive Income Galore: With triple net leases, you become the landlord of a commercial property while enjoying a steady stream of passive income. The tenant takes care of the property expenses, meaning you can sit back and watch your money grow.

2️⃣ Long-Term Stability: Triple net leases often have long-term agreements, typically 10-20 years, providing stability and reducing the risk of vacancies. This makes it an ideal investment for those seeking consistent returns over an extended period.

3️⃣ Hands-Off Investment: Unlike other real estate ventures that require hands-on management, triple net lease purchasing is more hands-off. You don’t have to worry about day-to-day operations, repairs, or even finding new tenants. It’s an investor’s dream!

4️⃣ Diversification Potential: Triple net lease investments offer diversification opportunities as you can invest in various commercial properties across different industries and locations. This diversification helps mitigate risk and can enhance your overall investment portfolio.

Now, let’s address the big question: how can you get started with triple net lease purchasing?

1️⃣ Let us Educate You: We can provide all you need to know about triple net leases and their advantages. We’ll make sure you understand the risks and rewards associated with this investment strategy. Knowledge is power!

2️⃣ Let’s Meet: You need a qualified real estate professional who specializes in commercial real estate investments. We can guide you through the process, provide valuable insights, and help you make informed decisions.

3️⃣ Due Diligence: We will conduct thorough research on potential properties and tenants. We evaluate factors like location, tenant creditworthiness, lease terms, and property condition. This ensures you will be equipped to make smart investment choices.

Remember, investing in triple-net lease properties requires careful consideration and proper due diligence. It’s always essential to consult professionals and assess your own financial goals and risk tolerance. That is what we are here for.

Ready to dive into the world of triple-net lease purchasing? Let’s make those passive income dreams a reality – Call Beiler-Campbell Commercial today (610) 444-7770

Knowing the Terms BEFORE you sign on the Dotted Line

It is essential to understand all the intricacies of a commercial lease before signing because a commercial lease is a legally binding document that outlines the terms and conditions of your rental agreement with a landlord or property owner. It is a critical legal document that defines your rights and responsibilities as a tenant and the obligations of your landlord.

By fully understanding the terms of the lease, you can make an informed decision and negotiate more favorable terms that suit your business needs. Additionally, a lease can have significant financial implications, such as rent payments, security deposits, and utilities, which can impact your bottom line. Understanding these terms and obligations can help you budget and plan effectively for your business.

Some of the key aspects of a commercial lease that you need to understand include the length of the lease, rent increases, maintenance responsibilities, repair obligations, alterations, subleasing, termination, and renewal options. You should also pay close attention to any fees, such as late payment penalties, utilities, insurance, or property taxes, and your rights as the lease progresses, terminates or any other unforeseen circumstances.

It is always recommended to seek the advice of an experienced Commercial Brokerage who can help you navigate the complex legal language and interpret the implications of the lease. By doing so, you can ensure that you have a solid understanding of all the terms and obligations of your lease, protect your business interests, and avoid any costly mistakes or disputes down the line.

Beiler-Campbell Commercial has 50 years of experience that we would be proud to put to work for you. Contact us today to set up an appointment to discuss your commercial real estate goals and we will be happy to provide solid advice backed by market knowledge and expertise.

VR, AR – Is Commercial Real Estate in it for the long haul?

Virtual reality (VR) and augmented reality (AR) are already making significant changes in the commercial real estate industry. These technologies provide an immersive experience that allows people to interact with properties in ways that were not possible before. Here are some ways that VR and AR are expected to change the future of commercial real estate:

1. Virtual Property Tours: VR and AR technologies allow potential buyers, tenants, and investors to experience properties without actually being physically present. They can explore every nook and cranny of a property from the comfort of their own home, allowing them to get a better sense of the space and its layout.
2. Design Visualization: These technologies are also useful for architects and designers who want to create a visual representation of their vision for a space. VR and AR can provide a 3D model of the property, allowing them to make changes and see how they would affect the space.
3. Virtual Staging: With VR and AR, you can create a virtual version of a space and stage it with furniture and decor. This can help potential buyers or tenants visualize what the space could look like and how they could use it.
4. Enhanced Marketing: By using VR and AR, brokers can create highly engaging marketing campaigns that allow potential buyers and tenants to fully immerse themselves in a property. This can help to generate more interest and ultimately lead to faster sales.
5. Remote Collaboration: VR and AR can also be used for remote collaboration, allowing architects, designers, and clients to work together on a project regardless of their physical location. This can save time and money, as well as increase efficiency.

Overall, VR and AR are expected to revolutionize the commercial real estate industry by making it more accessible, efficient, and engaging. These technologies will continue to develop and evolve, and we can expect to see even more innovative uses of VR and AR in the years to come.

The Advantages of Hiring A Commercial REALTOR

There are several advantages of hiring a commercial realtor when looking to buy or lease commercial property, including:

1. Access to Market Knowledge: Commercial realtors have access to a wide range of market data, including information on properties, rents, vacancies, and more. This information helps them to provide you with a better understanding of the local market and make informed decisions about your real estate needs.
2. Professional Negotiation: Commercial realtors are skilled negotiators who can help you get the best deal possible on your commercial property. They have experience in negotiating contracts, leases, and other legal documents, and can ensure that your interests are protected.
3. Time Savings: Hiring a commercial realtor can save you time, as they will take care of the research and legwork involved in finding and securing the right property for you. This allows you to focus on running your business and other important tasks.
4. Industry Connections: Commercial realtors have established relationships with other industry professionals, including attorneys, lenders, and property inspectors. This allows them to provide you with a comprehensive range of services and resources, which can be particularly helpful if you are unfamiliar with the commercial real estate industry.
5. Expert Advice: Commercial realtors have extensive knowledge of the local market and can provide you with expert advice on the best locations, properties, and investment opportunities for your business.

Overall, hiring a commercial realtor can help you save time and money while ensuring that you make informed decisions about your commercial real estate needs.

Gratitude – Not Just a Season

I’m stepping back from the subject of Commercial Real Estate to take a moment to focus on the importance of gratitude in our lives. In a world of Insta and TikTok, I feel it’s essential to steal away from “look at me” to search my soul to ensure that I’m expressing proper thankfulness in every way possible. When we are a thankful people, we are people of positivity and hope. We focus on the needs of others and tend to forget or at least lessen the impulse to focus on our troubles. Gratefulness is like oxygen to our lungs when we wake up in the morning.

After my feet hit the floor in the morning and the hot water in the shower awakens my soul, I thank GOD for that hot shower…every.single.day. There were bad times in the past that hot shower was a luxury and I forgot what home meant. I guess that really increased my appreciation of the little things that I now see as big blessings. I always want to see them this way. When really “big deal” blessings come along, then I’m knocked of my feet. It’s a good thing.

So, to those of you that are feeling some sorta way, struggling to see light and feel joy, challenged with stress or anxiety and don’t see a way out, just take an initial step. Express your gratitude each day even if it is for your hot shower. Express it outloud so that your ears hear it, your brain absorbs it and your heart feels it. For you “visual” folks, write it down or post it on your social media. There’s something about getting it out into the atmosphere that changes our atmosphere, internally and externally.

This week we started a Gratitude Board and we’re all posting things, people, etc. that we are thankful for. I honestly might put a picture up of hot water coming out of a shower head.

Beiler-Campbell Realtors Day of Service

Our company is all about community. We have served our local community since 1973 with integrity and excellence. One of the things, I believe, that really sets us apart is our collective heart for service. We firmly believe in supporting our neighbors.

This year we hosted our Annual Charity Golf Tournament and raised over $40,000 for Family Promise of Southern Chester County and After the Bell Kennett Square. Our Spring Community Food Drive provided over 10 truckloads of food to families in need in our area.

Every fall, we take a day as a company and perform acts of service in tangible ways within our neighborhoods. This year we sent a group to Tick Tock Early Learning Center in Avondale to build cubbies, a home of a Veteran in Coatesville needing maintenance, cleanup and landscaping at a volunteer-maintained Oxford Cemetery, dance parties, karaoke, manicures and games with the folks at Friends Home in Kennett, and repairs to a home in Nottingham. Additionally, we held a food drive in which Anvil Land Transfer and Delaware Valley Financial Mortgage matched the donations! The food was delivered to local food cupboards. This is a re-build of a deck and ramp so that one of our neighbors can easily access their home.

In just a few hours, the deck and ramp looked brand new! Great work!!

The Oxford Cemetery is “volunteer maintained”, so Beiler-Campbell volunteers manicured and spruced up the gravesites in honor of those who’ve gone before us and their families.