To Own or Lease your Place of Business?
Posted: February 25th, 2006
Category: Real Estate News
Atlanta Business Chronicle recently hosted a Broker Round Table discussion to cover business owners buying versus leasing their buildings. The participants were: Ken Ashley, Cushman & Wakefield; Alan Joel, Alan Joel Partners; and Kirk Demetrops, The Griffin Co. The discussion included the following quotes:
“We see probably triple the interest in buying, from owner/users, small, medium-sized tenants right now. Interest rates are low. Banks are wanting to lend them money. The can usually get in somewhere in between, on the high end, 10 percent down and 20 percent down. And it’s a great investment for them.” - Joel
“If you have a growing dynaminc company, that entrepreneur has excessive returns probably, so he’s going to put his own capital into his business to grow.” - Demetrops
“…nonprofits. They know what their growth is and they’re very sensitive to rental rate increases, and it’s very important for them to have their own facility to keep that stable.” - Joel
“…owning real estate can be a very good edge for your own personal portfolio.” - Ashley
These quotes reaffirm the position that it’s a good idea to invest in yourself. No one knows your company’s future potential better than you do. By owning the real estate that your company operates out of allows you to diversify your personal investments, avoid fluctuations in the rental market, and take annual depreciation adjustment on taxes on an owned investment.
Current market conditions are creating great opportunities for tenants to become owners. Interest rates have remained low, banks are aggressive to make loans to company owners and the office market sales prices are still low. The local (Cherokee & neighboring counties) market was saturated with office product a few years ago and absorption has been slow due to excess supply. Thus, prices have remained low as new product enters the market to compete with existing office buildings. Business owners can purchase space between $120 and $140 per square foot in Woodstock. At these prices, monthly payments are about the same as rent.
Office space will be absorbed more rapidly in the coming months and years as population growth continues at a steady pace. Plus, new office developments will slowly raise the price point. I expect interest rates to continue a slow rise over the next few years, but remain low enough to make owning your place of business a smart financial decision for you and your company.
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