Benefits Of Leasing vs. Purchasing Office Space


Benefits of Leasing vs. Purchasing office space.  Economic uncertainty and market volatility are causing many of companies to question their commercial office space needs.   What’s the right decision for your business?  Should you lease office space or purchase office space?  The short answer is, well, it depends.  Not sure if leasing is right for you?  Comparing the benefits of leasing office space against your company’s commercial real estate needs can help.

Some of the benefits vs. purchasing office space include:

Increased Flexibility. Leasing office space provides flexibility that you lose when you purchase an office building or office condo.  You have the opportunity to expand as you grow and to sublease office space should you downsize.  By leasing, you also maintain the flexibility to move the business when the lease expires, without the headache of a building sale.

Smaller Initial Cash Outlay.  When leasing office space, depending on your market, credit standing, and negotiated terms, your initial cash outlay will generally consist only of first and last months’ rent.  Purchasing commercial real estate requires a down payment—often as high as 25 percent of the purchase price—as well as the expense of appraisals, building inspections, loan fees, and property improvements.  For example, an office building listed for sale at $4,400,000 is also listed for lease for $30,000 per month.  At 25 percent down this represents a $1,100,000 cash outlay, versus a $60,000 initial lease deposit – a difference of 95 percent.

Tax Benefits.  Because an office lease is a business expense, it is fully tax deductible.  This includes all financial obligations to your landlord.  So if your landlord passes through property taxes or janitorial fees, you can deduct the costs.  Office building owners can write off some costs as well, but generally over much longer periods of time.  For example, property improvements must be written off over a period of 39 years.   Office space renters also have less tax paperwork than owners.  Please note, tax laws are fluid and nuanced, so it is vital to consult with your attorney and tax professional to understand your unique obligations.

Less Dependence on Credit. While your credit can affect your office space rental, particularly the initial rent and security deposit, the effects are more severe when purchasing.  If you do not have good credit, you may fail to qualify for a loan, or if you do, high interest rates will put a strain on your monthly expenses.

Improved Location and building quality.  Leasing allows you the benefit of upgraded facilities and prime locations.  Real Estate 101 teaches us that all property should be put to its “highest and best use.” In layman’s terms, this means that areas of high demand will produce large projects capable of meeting the demand, putting the purchase of Class A office buildings and low-rise suburban office complexes beyond the size and price limits of most businesses.

Reduced responsibilities. Owning commercial office property means maintaining it.  This can include leasing vacant space, managing janitorial issues, property maintenance, and security, among other expenses.  Even if you hire a property management company to handle day-to-day operations (which can be expensive) this can still be a time consuming process.  Leasing simplifies your life and allows you to focus on your core business.

Opportunity Costs.  Money spent purchasing your office space is money that is not invested into your business.  This can be especially critical for newer businesses that need money to grow and invest in its people, business and infrastructure.

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Libertyville Commercial Office Space Leasing

As a northern suburb of Chicago, Libertyville holds a lot for both residents and business owners to enjoy. Residents move to Libertyville for its beautiful, safe neighborhoods and plentiful amenities close by while business owners lease commercial office space in Libertyville for a different reason…the welcoming customer base.

Benefits for Residents and Commercial Tenants

Libertyville may entice individuals and businesses for different reasons. However, there are shared positive attributes as well. Libertyville has a lot for individuals to do within the village limits. For lovers of the outdoors, Libertyville offers 2 golf courses, 3 lake areas and more than 10 parks to choose from when craving some outdoor time. For the swimmer, there are two pools in Libertyville which residents can take advantage thereof.

Shopping and dining options are also readily available in Libertyville. Stores such as LexiWynn Designs, Serendipity, Lindsey’s Interiors and Gifts, Rollands Jewelers, Trader Joe’s and more can be found in Libertyville. Looking for a bite to eat? No problem. Try dining options such as 545 North Bar and Grill, Bakers Square, Casa Bonita or the Egg Harbor Cafe to satisfy your appetite.

Transportation is also easy in the Village of Libertyville. Travel by car is common but there are also various modes of public transportation as well. Libertyville has three Metra stations which offer various transportation options throughout the state.

Why Business Owners Should Lease Commercial Office Space in Libertyville

Forbes had stated that Lake County, where Libertyville is located, is one of the top places for businesses within the U.S. In fact, when you look at the statistics surrounding Libertyville, one can see that this area is a good one for business owners. When you lease commercial office space in Libertyville, you are placing yourself and your company in a great position.

Libertyville has about 900 local businesses in operation within the village limits. With a population of approximately 20,000 residents, you know that the client base is there and ready to use your products and services. When leasing an office in Libertyville, you are making yourself available to the consumers and making it likely that your business products and services will be put to good use.

Also, there is an affluent residential base in Libertyville. This means that not only will you have customers around you, but they will be customers who can afford your goods and services. Even with the 900 local businesses currently in place, a population of 20,000+ equates with you having a good flow of consumers to your company.

Find the Perfect Office to Lease in LibertyvilleHand Shake

There are companies/entities of all sizes in Libertyville. From large institutions such as Volkswagen Credit to even larger establishments like the Advocate Condell Medical Center, the types of businesses are wide and varied. Office leases are varied as well in Libertyville. So, no matter whether you are searching for a single room office in an office building or want to rent out an entire corporate center, the Village of Libertyville will be able to accommodate your business needs.

Oakbrook Terrace Office Space

Office Space In Oakbrook Terrace

Oakbrook Terrace Office SpaceLeasing office space is a common commercial real estate option for businesses these days. For business owners in Chicago and its surrounding suburbs, leases are readily available. One city which sees a lot of leasing potential for businesses of all sizes is Oakbrook Terrace. Located in DuPage County, Oakbrook Terrace has the space and leasing variety which draws new businesses in each year and keeps the local businesses in place year after year as well.

Oakbrook Terrace: Perfect Place to Live and Work

Oakbrook Terrace has a good combination of commercial and residential areas. Both residents and business owners choose Oakbrook Terrace because it offers something for everyone. Residents appreciate the friendly, safe community with plenty of housing options while business owners find that the leasing options, readily available amenities and location of Oakbrook Terrace suits their business needs well.

Location Allows Ease of Access

As a suburb of Chicago, one who lives and/or works in Oakbrook Terrace will find that they are close enough to Chicago to visit when they like and getting to/from Oakbrook Terrace is a simple task. If you choose to drive to/from Oakbrook Terrace, major roadways such as I-88, I-355 and I-294, as well as plenty of smaller roads, are close by. For flights, O’Hare International Airport is not too far away, which is a nice convenient option, especially for business travelers.

Shopping and Dining Options Are Plentiful

When you live and work in Oakbrook Terrace, it’s good to know that you won’t have to go too far for shopping and dining options. Popular stores such as REI and AT&T, in addition to small, locally-owned boutiques and shops, meet the area residents and employees shopping needs while dining options include Jimmy John’s, Subway, Giordano’s, Caribou Coffee, Devon Seafood & Steak and more ensure that one will have a wide array of food options to choose from for all of their meals. Having these service providers in town is a great aspect for residents and commercial entities.

Recreational Activities Keep Residents and Business Owners/Employees Entertained

There are many recreational activity opportunities for residents and business owners in Oakbrook Terrace. The Drury Lane Theater is a popular spot as well as various parks throughout the city. During the summertime, there are outdoor events which keep the whole family entertained. Fitness centers are also found in town which is a great option for before/after work and on the weekends.Oakbrook Terrace 3

Commercial Leasing Opportunities in Oakbrook Terrace

Businesses can lease an office in Oakbrook Terrace in various locations throughout the city. The convenient locale of Oakbrook Terrace is in a suburban area but still close to Chicago which makes it ideal. Whether your business calls for a single office setting, shared office space or large office building, there is a spot for you to lease in Oakbrook Terrace. Your tenant representative can help you to locate the perfect lease for your business and help you to get well on your way to opening up shop in Oakbrook Terrace with ease and efficiency.

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Leasing Office Space Guide: Ten Steps

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It’s no secret that Chicago commercial real estate values have declined in the economic downturn. Landlords have suffered from increases in vacancy rates and tenant defaults.

While this is bad news for landlords of office buildings, it’s good news for prospective office space tenants.

Increased vacancies mean more office space rental options and increased defaults means those office tenants with strong financials have the potential to leverage their security in exchange for lower rental rates and lease concessions.

However, in order to effectively capitalize on these opportunities, you need to employ the right strategy.

These 10 steps will keep you on the right track.

Assemble key Decision Makers and Advisors

Before you begin analyzing your office space needs, assemble all your key internal decision makers.  This should include anyone with insight into your company’s forward trajectory and growth plans, including finance, human resource, and IT professionals.  Getting everyone on the same page from  day one will not only save valuable time down the road, but often these professional will  shed light on issues that might have otherwise been overlooked.

During this initial assemblage, you should also retain the services of a tenant representation broker.  Having one professional represent your interests provides for one single point of contact, allows for more effective negotiations, and ensures your commercial real estate broker is representing your interests rather than the landlords.

Determine Future Space Needs

Working with your professional space planner, carve out a future needs assessment.  You should be considering factors such as growth or reduction plans, projected budgets, anticipated technology requirements, as well as branding and image issues.  If you’re trying to create a ball park figure in your head, assume approximately 200 square feet per employee for general office space, with professional service firms such as attorneys usually using about 400 square feet per professional.

Handling this upfront is more important today than ever.  Many companies have gone through staff reductions and you may have extra space (and extra money) available right under your nose.

Additionally, this upfront planning can protect your company’s future.  For example, you may want to negotiate a right of first refusal on contiguous space.  If you don’t assess your space needs, you could miss an opportunity.

Create Your Real Estate Plan

Now that you’ve examined your potential space needs, get a summary down on paper.  Include information such as your cost parameters, ideal lease term length, ideal locations and building types (Class A, Class B, Class C), and organizational issues.  Do you need creative office space?  Do you need lots of perimeter offices?  Understand these needs now.

You should also address parking needs, security and access issues, office hours, timing, signage, and the need for tenant improvements.

Organize your list by priority.

Creating this plan upfront will avoid you touring space that won’t work for your business.

Present Your Requirement to the Marketplace

Now it’s time to put your tenant representative to work.

Armed with your detailed space needs, your broker will survey the market and come back with relevant options.  Since you’re working with just one broker, they will be able to confidently approach the entire marketplace on your behalf to ensure your hearing about every possible opportunity.

Tour the Marketplace

Now is the time to get out and look at space.  Bring your real estate plan and evaluate your needs and goals against the available space.

Shortlist and compare your top choices

After you’ve had an opportunity to tour all potential buildings, shortlist your top choices and create an apples to apples comparison.  Make sure you consider both the financial and logistical factors.

Request Proposals

This is where you begin to trade paper and negotiate your deal.

As we discussed, it’s a good time to be a tenant.  High vacancy rates are forcing many landlords to drop prices and increase their tenant concessions.

There is a flip side to this.  Landlords have been burned during the recession.

There is close scrutiny on financial statements and an increased wariness of unproven businesses.

You have to approach this stage properly or you can end up with a bad deal or no deal at all.  A good tenant rep is an invaluable asset during this stage.

Sign your Letter of Intent and Negotiate Lease Documents

Once an agreement has been reached, both you and your landlord will sign what’s known as a Letter of Intent.  This is generally a non-binding document that outlines the major lease points.  Your attorney will use this to begin drafting your final lease documents.  It’s a good idea for your broker to work in concert with your attorney to ensure the spirit of the language reflects the negotiated terms.

Navigate the Construction Phase

After your lease is signed, you’ll need to begin the work of improving your space.  It goes without saying that if you’re moving into a raw space that needs to be completely built out, this will be significantly more complicated than moving into a built-out space that needs minimal improvements.

If you’re looking at building out space, a good project manager can be an invaluable resource.  They can help you review construction bids, as well as bids from furniture and IT vendors.  They can also manage the construction process, coordinate inspections, and track progress against your projects completion dates.

Supervise Project Completion and begin Occupation

In this last stage, you’ll want to ensure the practical completion of the project, meaning, your contractors have done the job they said they were going to do, and the job is up to standard.

You’ll also submit your Code of Compliance Certificate to your landlord.  They will require this before you occupy the space.

You’ll also want to give your space on final walk through to make sure everything is in its place.