Is It Better To Rent Or To Buy Your Office Space?

Starting a new business can be hard but rewarding both short-term and long-term with many factors contributing to its success. Getting the right office space can be a big a major player both financially and logistically, so getting it right first time can is essential.

Finding the right premises is often one of the first purchases for many new businesses but the question that should be considered before anything else is, should the London office space be rented or bought and what is best for business.

Many businesses are started from home, which is effectively the best way for it to start to consider its vitality before investing into office space, but as the business grows; it can be more productive to take the step to having your own concessions.

There are a few main points to consider when deciding on whether to rent or to buy which may make the decision much easier.

The first main thing to consider is the issue of money and initial capital. Everyone knows that when buying a property an initial lump sum of money is needed in order to make the purchase. It works exactly the same way for buying business concessions. Unless you have a large amount of money to directly buy a London office space, then a commercial mortgage may also be required.

The downside of this is that it may affect the possibility of securing potential borrowing capital for new projects having a big impact on profit. After this, it is worth taking into consideration that by buying the office space, it is investing into the business long-term, which is in turn as asset.

The good thing about renting is that a large sum of money is not always required up-front, usually only one-three month's rent in advance is required. The down-side is that money is being investing into someone else's business and profitability.

However renting will give greater control over cash flow and rents tend to be fixed whereas mortgages are variable and can change repeatedly. Building owners will also have to pay extra for things like building insurance.

All businesses will have to consider other bills such as business rates and utility bills, so when calculating costs these need to dictate on whether it will be more valuable to rent or buy.

As a leaseholder it is not the businesses responsibility if problems arise with the building such as damage to the roof, it would be the responsibility of the building owner. This could be a major factor on whether to rent or to buy, and depends on the level of responsibility the business wants to take on. By renting London office space if things go wrong it will not affect the profit if major repairs are needed, making it much more appealing to many businesses.

One of the final things to consider is flexibility and where the business will be a few years' time.

As the business develops, more office space may be required, so the concessions that are currently being used may not be suitable long-term. If that is the case, it is much easier to relocate with rental office space. It is an idea to arrange short-term rental agreements so that in the instance that your space needs change it is easier to move on. If the promises are owned, it can be a bit trickier to move forward.

Quite often the only options are to lease out the office space, now making you a landlord, with all the responsibilities as mentioned previously.

There are other things to consider when deciding on whether to rent of buy office space but the main ones have been mentioned above. Ultimately it is down to personal choice and what is best for business, either way it has to be financially viable.

Source by Shivani Gurtu-Louth

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