Why companies prefer leasing to buying commercial space for business purposes?
Ever wondered why huge tech giants or businesses like TCS, Capgemini, HCL, etc prefer leasing buildings for their business purposes rather than buying it?
As most of the businesses operate from commercial spaces, whether they are factories or offices, the cost is always the major factor for them. When launching a startup or expanding an existing business, you will need commercial space. If you are thinking of buying a property, it is obvious that you will require a huge upfront investment which is not the case if you are opting for leasing it.
Buying a commercial space is not the wrong choice until and unless you are aware of the factors that could affect its value. It has an intrinsic value associated with it, which appreciates over a specific span of time, but companies still tend to choose to lease over buying. Buying has its own merits and demerits and requires a lot of analysis and planning. But in the latter, you lease the property for a specific period & at the end of its term, you can renew the lease agreement if you wish to continue using the property. The lack of this large upfront investment in leasing which is needed in buying keeps the company’s funds more flexible for use in other areas.
Here are some considerations that explain why companies prefer leasing to buy when it comes to real estate:
Inexpensive: Yes, it   is true that in leasing interests are added while paying but still it is far better than paying a large lump sum amount in a single go. You can get a great deal for your money through leasing rather than buying an asset, including the potential to upgrade the technology, services, and maintenance if any breakages occur. So this makes it quite preferable and an efficient option.
Less Responsibility:Â Managing a commercial space can be complicated as there are insurance requirements, maintenance costs, and other issues that can distract companies from their business. This in turns spares them a lot of time and stress as all of this has to be taken care of by the owner of that space, which allows you to focus solely on your business.
Tax Benefits: You will be glad to hear that the entire lease amount is tax-deductible, in contrast to a mortgage's interest-only deduction.
Flexibility in choosing locations: Qualifying for a loan for leasing is easier than qualifying for getting a loan to buy a commercial real estate, which means you can choose a prime location for your business without having to pay a large amount. Having a business at a strategic location can do wonders. This flexibility also allows you to stay by renewing the lease or leave the space after the lease is up as you are not bound into a mortgage.
Less Documentation: When buying a property you have to go through a lot of legal documentation which makes the process time-consuming. Though in leasing, documentation is included too, less as compared to buying a commercial real estate asset. So this also a reason for the companies to choose to lease over buying a commercial space as they don’t have much time for this.
