Choosing a new office is a daunting task, and for a good reason. After all, this choice determines the path your business will be taking in the future in many ways. In order to avoid repercussions, you need to thoroughly research the office market and your company’s budget. Business space in New York provides a lot of value to growing companies. However, this benefit comes with the most expensive office market in the country, so tread carefully! The rent vs. buy problem carries many questions, most of which are answered for you in the rest of the article. Without further ado, let’s take a look at all the factors you need to consider before making the big decision.
Consider your business growth stage
Before you start weighing the pros and cons of renting and owning office space, there’s a more pressing issue to consider. Namely, how is your business doing? Do you have an expansion plan or are you simply looking for a more professional business setting? The key here is to determine your priorities. If your business is still new and growing, you should be investing resources to tailor your core competencies. At this point, spending money on R&D, marketing and personnel is still a bigger necessity for business growth. Renting a business space in New York will be significantly less expensive and it gives you the flexibility to move once your business develops. However, if your business is already established, we’re looking at a different picture. In case you’re prepared to tie up a substantial portion of your capital in real estate, buying can be a smart choice for further success. Knowing the office space preferences and requirements and the burdens that come with property management will make all the difference when buying.
Weigh all the factors before deciding on a business space in New York
This decision should never be taken lightly, so make sure you carefully consider all the pros and cons. Depending on your situation, you’ll find which factors are most important for your business to flourish. Here are the most important ones to muse over:
- Control vs Flexibility– Depending on the type of business, you may or may not need to make some changes to the property. Whether it’s a simple renovation or some additions, you’ll need permission from your landlord in case you’re renting. On the other hand, with your own office space, you can deal with any facility issues that arise in a more independent manner. Then again, when renting, you can easily move to another place once your rental agreement comes to an end. Owning your space doesn’t allow for this flexibility.
- Land value – Whether the location of the office is in an area where land values will increase or stagnate is another important factor. If your business space in New York loses value, you’ll suffer the effects. To avoid this, you need to be able to spot a favorable deal before prices jump up in recognition of it.
- Space – If you’re working part-time, the good thing about renting a space is that you can share it with others. On the other hand, if that space is your own, unused offices can be rented to a tenant. After all, an additional income stream is always more than welcome.
- Upfront cost – When buying office space, you’ll have to secure financing or loan approval. And remember, it’s not just the down payment, but appraisals and inspections as well. Renting doesn’t require this much money upfront, leaving you with available cash for working capital or expansion.
- Location – If you’re just looking for a quick transition, then, by all means, go with the rent option, as you can just as easily opt out of the deal. However. when a seeking long-term solution, things get more serious. Buying, when combined with extensive research, is a better choice if you have a clear vision in mind.
Compare the economics
The most important of all the factors, however, is the cost. While you will surely skip on the down payment when renting, purchasing may pay off in the long run. If you’re in the middle of an office relocation, the main thing is to avoid rash decisions. Know that Brooklyn has to offer reliable storage while you carefully weigh your options. This is not an instinctual decision – it’s all numbers. Conducting a mathematical analysis of your cash flow in both renting and purchasing scenarios will help you make a final decision. To do this, you need to be familiar with the financial vocabulary in terms of purchase, lease terms, tax rate, the estimated value of the building, etc. Don’t forget other costs which are easily forgotten, such as maintenance costs. When leasing, the landlord is usually the one assuming responsibility for maintenance, but the table will turn once you’re the owner. Take all expenses into account to get a clear picture.
Long-range effect of the decision
This is especially true if you’re more on the purchasing end of the scale. New business owners usually have a tendency to concentrate on short-term results, and that’s understandable. However, it’s not enough to look at just the first year of cash flow for each of the alternatives. Buying is all about the future of your company, so ask yourself: how will your business benefit from being in that location years from now? How will the market change? On the other hand, if you plan on renting, can you foresee the need to modify the facility? What happens if your landlord doesn’t agree? Renting a business space in New York in a good location is cheaper than purchasing in that same location. But if the limitations of the space you’re renting are hurting your business growth, should you compromise or not?
In case you find it hard to reach a decision on your own, discuss the rent vs. buy problem with a qualified real estate agent. With professional help, you’ll assess your best options based on your current finances and long-term goals.