The global pandemic has affected every aspect of human life, including commercial real estate. It has wreaked havoc in the industry as most CRE sectors such as office, hospitality, restaurants, personal services, and construction services have shut down.
As a result, many commercial tenants are running out of business by temporarily closing down their workspaces and limiting operations. This has, in turn, caused a serious decline in revenues and financial sustainability. Even life-sustaining companies, like medical spaces and pharmacies, are experiencing a decline in their business, but are exempt from government restrictions.
Unlike previous economic challenges, COVID-19 has pervasively affected the CRE industry throughout the globe. Historically, the industry used to experience a 6-month lag during the economic crisis, such as the Great Depression and the 2008 recession.
Unlike in the past, CRE is a great loss today as trade has completely shut down, compelling them to go out of business. Therefore many big and small businesses choose to lease the commercial real estate for several financial benefits. If you’re on the fence of leasing or buying a property, then here we five very-sound reasons to becoming a commercial tenant, especially now!
Typically, leasing a property is much more affordable than buying one. When it comes to buying a property for your small business, you may require applying for an SBA loan, which has its own fee, down payment cost, and other related expenses. On the other hand, leasing only requires a security deposit and initial rent.
Lower Monthly Expenses
Although buying a property could be lucrative in the long run, but commercial businesses find leasing much more beneficial. Leasing is a lower monthly expense, and tenants can enjoy a further discount on tax-deductibles.
Maintain Balance Sheet
Typically, leases are an off-balance monthly record as it has no direct effect on your assets and liabilities, once paid off on a monthly basis. Furthermore, buildings depreciate over time, but leasing allows you to avoid devaluation costs and tax liability.
Reduce Maintenance Cost
Owning a building requires constant reinvestment on its maintenance and upgrades. If you have leased commercial space, you can move to a newer location without spending a dime on the maintenance of your current workplace. Moreover, you can even ask the landlord to make necessary upgrades and repairs as part of your lease agreement and thus wouldn’t require you to move out.
Mitigates Property Risks
If you own a building, but you plan to move out, it may require you to sell it off or rent out. In both the scenarios, if your building is a desirable piece of art location and configuration wise, then you may get a good price. Generally, commercial owners end up with a discounted rate as the factors affecting their business can have a similar impact on others.
Conversely, tenants can lease another space without suffering from any financial complexity of property ownership. Moreover, leases with renewal options allow you to stay longer in a commercial space with a pre-negotiated rent.
Why is Leasing a Better Options during the Pandemic?
Typically, startups opt for leasing property due to their rickety financial situations. But the global pandemic has adversely affected businesses, leading to the permanent closure of many brick-and-mortar shops. However, leasing seems to be a lucrative option to improve the survival of many businesses. Commercial real estate leasing is workable if you have:
Businesses having a large sum of initial capital may want to lease a commercial property as it will save costs. Even big businesses that are unable to generate cash revenue opt for leasing commercial space as they are unable to finance the business growth as well as property acquisition.
Unstable Business Needs
Due to current situations, businesses are facing rapid downsizing and unable to predict a foreseeable future. Therefore, they opt for renting property to stabilize their financial conditions for a steady prospect.
Too Many Responsibilities
Owning a property adds too many responsibilities, such as taxation, maintenance, and regular upgrades. Businesses that are at a growing stage require more focus, attention, and efforts towards its expansion and seamless operations. Hence, they choose to lease a workspace that translates their business identity, support workflow, and reduce the restrains of property management.
However, you’ll require an experienced tenant broker to reap the maximum benefits of leasing a commercial property. He will help you find the right space, negotiate the deal, and assist you with issues post-lease.
Steven Goldstein and Chicagobroker.com is an active tenant broker agency helping big and small businesses since 1991. If you’re seeking help for your commercial lease needs, then give us a call at any time at your convenience.