Pros and Cons of Leasing Commercial Property in Las Vegas
If you’re looking for a new location for your business, you’re probably evaluating if it would be better to buy or lease a commercial property. Leasing can save you money and leave you with fewer commitments, at the cost of some freedom and stability. Buying a commercial property gives you more control, building of equity and certainty about your location, but you’ll face high up-front capital investment and long-term obligations. Once you learn about what each option means for your business, you can decide which one appears to be the better fit and tailor your search to your needs.
Pros and Cons of Leasing Commercial Property
Once you weigh the pros and cons of leasing, you can decide if leasing is the right option for your business.
Pros of Leasing Commercial Property
Some of the benefits of leasing a commercial property include the following:
- Less expensive: Leasing can save you maintenance and upkeep costs and may offer more tax breaks.
- Greater liquidity: No down payment is necessary, leaving more capital free for other uses.
- More options: You’ll have a wider range of locations for your business to choose from.
- Fast: You can move into a new property almost immediately after signing a lease.
- Streamlined operations: By leasing, you can focus solely on your business and don’t have to worry about managing tenants or being liable for their safety.
Cons of Leasing Commercial Property
- Increasing rents: Your rent will likely increase over time, which may price you out of your location if it’s in a desirable area.
- Temporary: While commercial leases typically last anywhere from 3 to 10 years, your landlord may sell the building or refuse to renew your lease, forcing you to move.
- Little control: Your landlord controls how you use the space, preventing you from customizing your space without their permission.
- No income: You won’t be able to rent out space in your building to tenants, depriving you of a potential revenue stream, which can be important if you’re thinking of investment income.
- No equity: Your lease payments simply keep you in your current space and do not go toward an appreciating asset, which you can use as leverage for financing larger projects.
Is It Better to Buy vs Lease Commercial Property?
Ultimately, your own needs will determine whether it’s better to buy or lease a commercial property. There are clear advantages and trade-offs with each, and your choice will depend on the specific needs of your business.
When Is Buying Better Than Leasing?
Buying a commercial property may be better than leasing one if you want full control over your business. You’ll have the ability to make changes to your property as needed and won’t have to worry about renewing your lease or paying for rent increases. It’s also useful if you want to build equity in your business, which you can use as collateral for loans and is an asset to your balance sheet. Buying may generate investment income, appreciation and yield a return which many building owners use for retirement planning and a second income source.
When Is Leasing Better Than Buying?
Leasing has less out of pocket capital expense. Leasing may be better than buying if you want to focus on running or growing your business. You won’t want to deal with the added obligations that come with being a building owner, such as managing tenants and building maintenance. It can also be useful if you want a location in a prime area but are unable to buy a property there. If you want to be able to move your business later on or simply don’t have the money for a building, leasing is also a better option.
Special Considerations for Leasing Commercial Property in Las Vegas
- Look at current and projected demographic trends and pick the neighborhood that best matches your needs.
- Find out who is responsible for the capital improvements in the building that could generate a large surprise payment to the Tenant.
- Try to estimate future rents as demand grows since Las Vegas is growing rapidly.
The Las Vegas commercial real estate market is thriving with many new projects scheduled to open in 2019 and 2020. Whether you want to buy or lease, take the time to research your options because your decision will have long-term effects for your business. You might decide to make some fundamental changes to your business to take advantage of the options available to you.