PROPERTY NEWS - Throughout its life-cycle every growing business is confronted with the important decision whether to continue leasing or own the premises in which it operates.

 

Before this decision can be made, entrepreneurs should aim to understand the implications and establish whether this would be a good investment from a financial and long-term growth perspective.

Attie Anderson, head of Commercial Property Finance at FNB, says being in a strong financial position to invest in commercial property should be every business owners’ aspiration. However, not every business model supports owning commercial property. For some businesses, it may be better to lease.

He encourages entrepreneurs that are considering this type of investment to seek advice from their banks or financial advisors to familiarise themselves with the advantages and disadvantages of owning commercial property.

Pros

• Owning commercial property that increases in value can be a great investment for entrepreneurs that want to diversify or sell in the future.
• Operating a business from your own premises gives you peace of mind knowing that you do not have to worry about lease renewals and hefty rental increases.
• Should the business grow and require additional space, there is an option to renovate or extend the building.
• Financing commercial property eventually becomes less expensive in the long-term.
• Entrepreneurs have an option to refinance the property should they require additional capital to grow the business.
• There is an option to sublet a portion of the building and earn additional revenue.

Cons

• Investing in commercial property can tie up the cash flow of a business, due to poor financial planning.
• Operating from a fixed location can be a disadvantage should the business be required to relocate.

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