Commercial building investment: Should you build or lease?

Are your current premises and future business goals aligned? Be it an office, warehouse, or manufacturing facility, your physical space is critical to business success. 

While every business is unique, having the space and facilities you need is the key to productivity. This is why one of the most common questions we hear is whether it is better to own or rent commercial premises. 

To help you navigate this decision, in this article, we delve deeper into the two options and outline some key considerations, including the pros and cons of leasing an existing commercial space compared to building a new premise. 

When to upgrade your commercial property

Before we get started, it is important to assess whether it’s the right time to upgrade your commercial property. Upgrades often become necessary as businesses grow and evolve, particularly when your current facilities no longer support your operational needs or goals. If you’re noticing that your existing infrastructure feels restrictive and is starting to hinder your business's progress, this could be a clear sign that an upgrade is overdue.

Here are some key indicators that it might be time to consider upgrading:

• Restricted business growth: your current space may no longer accommodate the needs of your expanding operations, making it difficult to scale effectively.
• Safety challenges due to limited space: a cramped site can lead to safety risks, increasing the chances of accidents or inefficiencies in your daily workflow.
• Reduced efficiency and effectiveness: outdated or undersized facilities can result in slower processes, higher costs, and a lack of productivity, directly impacting your bottom line.

For more advice on this topic, read our full article outlining the economic benefits and business case of a new commercial building. 

Building a commercial premise

In general, there are two main motivations for purchasing commercial real estate — either a strategic move for operational requirements or a long-term investment opportunity. 

Building new commercial premises provides more opportunities for customisation and long-term returns. While the investment is generally higher upfront, this will pay off in many ways, financially and in terms of operational efficiency. 

A custom commercial building generates a greater return on investment because it is tailored to your business. With features designed to support your workflows, you can easily meet rising demands and increase productivity. What’s more, you’ll be gaining a valuable asset for your company that can be used for decades. 

Use our Commercial Building Returns Calculator to compare lease vs build costs and see what makes the most sense for you.

Pros of owning a new commercial building

• Facilities tailored to your needs support maximum efficiency and growth. 

• Be your own landlord and eliminate the middleman for any upgrades to the building. 

• Strong long-term investment as your funds are directed into a valuable asset. 

• Avoid high lease rates for a suitable building. 

• Future growth is in your hands. You can plan ahead for future extensions/renovations that will enable you to achieve your growth goals.

Cons of owning a new commercial building

• Committing to one space may be daunting if your needs change frequently.

• The upfront investment is higher than a lease. 

Alternative funding options for your investment

If the upfront investment in a new commercial building feels daunting, there are alternative ways to fund your project that don’t tie up your business's operational cash flow. For instance, you may be able to use your superannuation or other investment funds to finance the construction. This approach allows you to invest in a valuable business asset while preserving your working capital.

However, it’s crucial to seek tax, accounting, and legal advice to ensure compliance with regulations and understand the implications for your financial strategy. Leveraging these options can make owning your own custom commercial building a more attainable goal while setting your business up for long-term success.

Our team can help you understand the costs involved and investment options. Contact us for a no-obligation chat or quote today. 

Leasing a commercial property

If you’re working with a smaller budget or feel uncertain about committing to a specific property, leasing a building might be the ideal option. Leasing offers greater flexibility, allowing you to relocate or expand your operations with minimal financial risk. If your current space is no longer sufficient for your needs, leasing an additional building can provide the extra room required to support your business operations without the need for a large upfront investment. However, there are notable drawbacks to leasing. Splitting your workflows between two separate sites can create inefficiencies and logistical challenges, often resulting in slower operations and reduced productivity. 

Additionally, leasing is inherently a temporary, short-term solution. While it may appeal to newer businesses that are still in a state of flux or growth, leasing offers little to no long-term return on investment. Unlike owning property, leasing does not contribute to building equity or creating a tangible asset for the future. As a result, it is important to weigh the short-term convenience of leasing against the potential long-term benefits of purchasing or upgrading your own facility.

Pros of leasing a commercial building

• Flexibility to relocate if required. 

• Lower upfront investment can be appealing for smaller businesses. 

Cons of leasing a commercial building

• Functional limitations arise as you are forced to operate in an existing space. 
• Landlord consultation is required for any changes or upgrades to the building. 

• Low long-term payoff and no asset acquired. 

• Tenancy uncertainty, what would happen if the owner of the property decided not to renew the lease?

The benefits of building a custom commercial building

The ability to design it exactly to your specifications offers unparalleled advantages. By tailoring the design to meet your operational needs, you can create a highly functional and efficient workspace that aligns perfectly with your business objectives. For example, you can incorporate a wide range of features that suit your specific requirements, including:

• Custom bay sizes
• Windows and doors
• Internal walls
• Office fixtures
• Mezzanines
• Gantry cranes
• Roller doors and sliding doors
• Firewalls
• And more. 

This level of customisation allows you to combine functionality with practicality, enabling your team to work more effectively and efficiently in a space designed specifically for their needs. A purpose-built commercial building also provides the flexibility to adapt to changes in your business as it grows or evolves over time.

At ABC Sheds, we specialise in constructing large, durable buildings for a wide range of applications. Whether you need a space for industrial manufacturing, retail operations, warehousing or any other purpose, our expert team will work with you to create a structure that fits your vision and supports your success. From design to delivery, we’re committed to helping you build a commercial space that works for you now and into the future. 

Have specific requirements in mind? Reach out to discuss your options and how we can help bring your project to life. Or, for more information and ideas, download our free Commercial Buildings brochure. Inside, you’ll find everything you need to know about our structural steel sheds.