Recent developments in commercial real estate might suggest that leasing is becoming less attractive. With ongoing low-interest rates, purchasing has become more affordable. Additionally, skyrocketing property values in some markets may make it feel like you’re missing out if you don’t own. Changes to lease accounting standards have also removed some financial benefits of leasing.
However, these shifts don’t mean it’s a bad time to be a tenant—or even a landlord. While owning property might seem better in some cases, leasing can still be the best option depending on your needs. Let’s explore why leasing remains a smart choice.
Why Leasing Space is Beneficial
The first advantage of leasing space is that it is often less expensive than buying. While you’ll incur some costs for deposits and tenant improvements, they are minimal compared to a down payment or the expenses of customizing a purchased property. Additionally, if you need a smaller or specialized space—like a Class A high-rise office or industrial property—leasing often provides more flexibility in size and type.
More Options with Leasing
Another reason to lease is the variety of options it offers. In most central business districts, the majority of available office space is for lease. Suburban markets may offer more owned space, but this is often limited to large vacant campuses or small neighborhood offices and condos. These extremes usually don’t fit the needs of most tenants, making leasing a more viable choice.
Flexibility and Freedom
Leasing also provides flexibility. When your lease expires, you can move on without the burden of selling a building. Selling a vacant property can take a lot of time, especially if you’re unwilling to drop the price. With leasing, you can quickly adjust your space to match your business’s evolving needs.
This flexibility also extends to maintenance and expenses. If your leased space requires significant tenant improvements, you can move to a new building and let the new landlord cover those costs as part of your lease agreement. If your current building needs repairs, your landlord is responsible. If they aren’t willing to address the issues, you can simply move when your lease ends, avoiding the need to invest capital in repairs.
Building Community and Networking
Another often-overlooked benefit of leasing is the community aspect. Sharing space with other businesses allows for networking opportunities. You can build relationships with vendors, and your employees can connect with others in the building, creating a sense of community that reduces turnover. Owning a standalone building can make it harder to access these locational benefits.
Leasing: Still the Best Option?
All these factors make leasing an excellent option, even in a changing real estate market. While lease accounting standards and the broader economy may change, if leasing matches your business’s needs, it’s likely still your best choice.
If you have any questions or need assistance finding commercial space, contact us anytime at (480) 330-8897 or via email at request@leveragedcre.com. We’re happy to help!
Even after outlining all the information above, writing a letter of intent (LOI) can still seem daunting. That’s why the Leveraged CRE Team at Commercial Properties, Inc. is here to help locate commercial space for lease and assist in using a letter of intent to land such space. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
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Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
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