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

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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.

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.

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.

Active Listening – What is it and how important is it?

Pauses are often viewed these days as “awkward silence”. We scramble to fill it with noise… the noise of any kind, beneficial or not. Our lives are scripted to background music on our Insta-stories. Quiet even makes some of us nervous, uncomfortable. We conversate, but do not “saturate”. What I mean by this is we do not truly immerse ourselves in conversation as some of the generations that have gone before us. The technology wasn’t there to distract us. Before we address Active Listening and what it is, let us address the reasons why we listen.

Why we Listen

• To glean information
• To understand, wrap our heads around the subject matter
• For pleasure and enjoyment

Bad Listening Habits – What are they?

• Looking away – not focusing on the person speaking
• Multi-tasking – fiddling on your phone, etc.
• Talking over someone as they are trying to speak
• Pre-occupation – being wrapped up in your own thought process and focusing on your next thought or response

Ok, Active Listening – What is it and what are the benefits?

Active Listening has several key components. They are:

• Sole Focus
  • Eyes fixed on the person speaking
  • Preferably minimize possible distractions prior to beginning the conversation
  • Practice accessible body language
  • Appropriate and timely facial expressions – smiles, frowns, cringes, etc.
• Acknowledgement beyond the slim bounds of “hmm”, “uh-huh” and nodding your head yes or no
• Active feedback during intentional breaks in the conversation
• Instead of interrupting or confronting, ask for clarification – ask insightful questions
• Openness and neutrality in your responses

Now, the BENEFITS:

• Clarifying information wins out over misunderstandings and undue confrontation
• It builds a basis of trust between individuals, strengthening bonds of friendship or business affiliates/connections
• It attributes value from one person to another
• It takes us away from our pre-conceived mindsets and open our minds to other perspectives
• The more we listen, the more compassion we develop for other’s needs
• Think Golden Rule principle – how we want to feel is most likely how others want to feel. We want to be heard, paid attention to, valued, to feel important.

We exhibit these needs in everything we do these days from our posts on Instagram, Facebook, our Snaps, our Tik-Toks…we seek validation and approval. Let’s give it forward in how we treat others that are communicating with us and become better communicators ourselves, better professionals….maybe simply better humans.

Is Oxford the Next High-Growth Area for Southern Chester County?

Oxford Borough

Growth moves down the corridor of US-1, maybe not at the speed or intensity of the commercial property pricing drops or increases from east to west, north to south, but nonetheless, it moves.

The pandemic has hit so many small “mom and pop” towns with lethal blows to their economy and small business bases. As a local resident, I have been discouraged by seeing businesses close up over the COVID-19 pandemic, but I have also been encouraged by the way that the Oxford/Nottingham community has pulled together to support local and helped existing businesses sustain and even thrive in spite of the challenges they face, and as a bonus, encourage new entrepreneurship within the area with new “pop-up” establishments, like the “Rudolph’s Bourbon Bar” over the Christmas Holiday Season. Our local leaders really stepped up to the challenge of the “new normal”. Cameron’s Hardware helped us by offering no-contact pickup, and other retailers offered delivery via UBER eats and DoorDash. We saw what I’d like to call “Creative Sustainability” all around us. Existing local businesses like DuBarry have created brick-and-mortar spaces fronting on “Oxford Main Street” and are doing quite well. Home to great local eateries like Sawmill Grill, The Octoraro Tavern & Grill, Wholly Grounds, La Sicilia, Andres, the Nottingham Creamery, and Little Miss Oxford Diner, this town is full of character and charm. The new parking garage is a tremendous benefit to the retailers in our area. Oxford is also home to large businesses such as Neuchatel Chocolates, Tasty Baking Company, and The Scotts Company.

We are watching local entrepreneurs emerging such as the Whisky Shack, Smokin Dragons, Pickled Pickles, and Sweet Cakes, bringing new life and excitement to our area.

The Preston & Steve Show featured our own BellyBusters as one of the top 10 cheesesteaks of 1,000 different varieties taste-tested in the area! Now that’s impressive! Oxford Mainstreet Inc. announced that First Fridays will be starting up again in April. That’s just around the corner! There’s a lot of positive things going on in Southern Chester County during this arduous pandemic.

We have a unique opportunity available within the borough limits to present to you:

• 6,895 sf
• 2 story office building
• 40 car parking
• Could be used as:
  • Office
  • Medical
  • Flex
  • Institutional
  • Finance
  • Professional Services
• 1st floor amenities:
  • 11 Cubicle Offices
  • 2 Private Offices with smoke glass privacy
  • 1 Large Conference Room with smoke glass privacy
  • 1 Small Conference Room
  • 1 reception area
  • 2 restrooms
  • Large kitchenette area/employee lunchroom
  • Heated storage area
  • Roll-up drive-in delivery door (8×8) in the rear
• 2nd floor amenities:
  • 18 cubicle offices
  • 3 private offices
  • Server room
  • Small kitchenette area
  • 1 coat closet
  • 2 restrooms

Click here to tour this amazing space virtually:

Click Here to Request an Informational Packet

Celebrating Martin Luther King Day 2022

His legacy and impact live on. Martin Luther King, Jr. dedicated his entire existence to a non-violent challenge to the civil and racial injustice in America.

In a sermon he delivered in 1956, he impacted the congregation with this sobering thought, ““I am afraid that many among you are more concerned about making a living than making a life. You are prone to judge the success of your profession by the index of your salary and the size of the wheelbase on your automobile, rather than the quality of your service to humanity. The misuse of Capitalism can also lead to tragic exploitation.”.

In 1964, he conducted a lecture in which he challenged the hearers, “”I am only too well aware of the human weaknesses and failures which exist, the doubts about the efficacy of nonviolence, and the open advocacy of violence by some. But I am still convinced that nonviolence is both the most practically sound and morally excellent way to grapple with the age-old problem of racial injustice.”

In his final speech, less than 24 hours before his assassination, he charged the striking sanitation workers with this, ““We’ve got to give ourselves to this struggle until the end. Nothing would be more tragic than to stop at this point, in Memphis. We’ve got to see it through. And when we have our march, you need to be there. Be concerned about your brother. You may not be on strike, but either we go up together, or we go down together.”

How are you celebrating his legacy of faith, freedom, service and justice today?

Leave us a comment below and share with us how you are celebrating MLK’s legacy today….