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Posted by Anne on August 23, 2022

Buy or Lease Your Next Space?
By Elizabeth Holmes

For more than 45 years, R.W. Holmes has helped business owners with their real estate strategy, and one of the most frequent questions we get is “Should I lease or buy?”

There are several factors to consider when answering this question. Businesses should make decisions about leasing or buying office space based on economics and strategic considerations. The following case study shows and example from a recent client when it was better to buy than to lease.

Case Study: Novatio Engineering, 1377 & 1395 Main Street, Waltham
Novatio Engineering is a technology development and engineering consulting company focused on mechanical design, combustion systems, clean energy, and appliances. Novatio had asked for RWH’s assistance with finding a property to acquire that could fulfill their current space needs as well as future growth.

The Challenge:
They needed to stay close to Waltham as that was the location of their existing operations. After comparing options to lease versus the potential to buy, Novatio determined it was more cost-effective and in line with their company strategy to purchase a building.

The Solution:
After one year of looking for opportunities, RWH was able to identify the buildings on Main Street and help Novatio acquire the property that had multiple bidders. RWH continued to assist Novatio through due diligence – referring vendors, keeping on top of deadlines, and creating a leasing strategy for the existing tenants.

Why Buy in Today’s Market:
Though interest rates are on the rise, it may still be more cost-effective to purchase a building and pay a mortgage than paying today’s market rents for industrial/flex buildings. Rental rates for industrial/flex properties have doubled or in some cases tripled in the last 3-5 years. This price fluctuation has left some businesses shell-shocked with the increased expense and the desire to control their own future destiny as their own landlord.

Things to Consider:
It is important to consider a few factors when deciding to buy your next building rather than lease. This includes:

  • Limited Supply – there are extremely few quality industrial/flex properties available in the Greater Boston market. This means it may take months or over a year to find the right building and to be the top bidder. Plan accordingly so you leave ample time before your lease expiration.
  • Down Payment – Expect to put down anywhere from 10%-30% for a down payment. 10% down payments are available as part of the SBA loan program.
  • Property Management – depending on whether you buy a vacant property you intend to fully occupy or have other tenants in your building, you are now fully responsible for the maintenance and well-being of the property and its tenants. Some people welcome this opportunity while others never want to be a property owner and take on the additional headaches that come with managing a property.

    Get Help Finding Your Ideal Commercial Property
    Whether you want to buy or lease, R.W. Holmes can help. We offer brokerage services to property owners, tenants, buyers, and sellers. Let us help you explore your options.

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