Fort Worth offers many beautiful commercial centers with its unique mix of old and new architectural styles throughout the City. Classic brickwork enhances the wonder of glittering skyscrapers, and plenty of smaller stand alone buildings add to Fort Worth's charm. Local businesses looking for a new location could not hope for a better environment, as Fort Worth offers a wide selection of commercial properties in terms of style, size, and price range. Whether you're opening a boutique shop or a gourmet restaurant or seeking a new home for your legal firm, you can find the perfect Fort Worth commercial space.
However, one of the most important decisions you'll need to make is whether to lease or purchase your new space. Renting or buying a commercial property in Fort Worth will define your experience, and the right choice varies with each business model and future plan.
Renting commercial property: Pros and cons
Many businesses choose to lease their commercial locations rather than buy a building or suite outright. Renting commercial property is often a clever strategy, allowing businesses to manage their finances and future plans with greater flexibility instead of investing deeply in a single location. Of course, as with any business strategy, there are pros and cons when choosing to rent your commercial location.
Pros
Flexibility to move or grow in the future
Leasing commercial property gives your business the opportunity to change locations or expand in the future without worrying about investment in your starting location. A short-term commercial lease can help a brand gain visibility and build a local customer base, even if you plan to move to a more prestigious or larger location in the future. Startup companies also have the opportunity to grow rapidly and plan their next real estate location based on the results of that growth rather than trying to predict their future space needs during the launch phase.
Beneficial tenant deals with property owners
When negotiating a commercial lease, business tenants often gain benefits that include amenities, services, and covered costs they would not obtain as building owners. Leasing a single commercial unit in a large building can give your company, employees, and/or clients access to amenities the business might not be able to afford when seeking to buy a property, along with services that cater to larger properties such as providing cutting edge technology, supplying food courts, or adding athletic facilities.
Access to desirable locations
If your business is to thrive in a popular marketplace, leasing is often the only option. For example, positioning your business in a bustling shopping mall or as a shop in a high-rise office building can yield excellent revenue opportunities in a location that would never be available for independent sale.
Fixed and predictable monthly costs
Owning a property involves more variable costs due to maintenance and upkeep schedules. Leasing a property allows you to negotiate a predictable and fixed monthly expense for your business location.
Tax breaks for property expenses
Lease payments, property insurance, utilities, and maintenance costs can all be deducted from your business taxes, significantly reducing the cost of a business location in your financial books.
Greater available liquid capital
Leasing a commercial property can leave more of your current capital available to invest or utilize for business operations rather than sinking it all into a property purchase.
Leasehold Interest
The primary value of the lease to a tenant is the right to occupy and use the space. However, because the tenant must pay rent according to the lease, the leasehold estate has additional value to the tenant if the contract rent is less than the market rent for similar space. The value of such leasehold interest coupled with the ability to sublease would yield a positive cashflow for the tenant.
Cons
Limited control over the space
When you lease a space, you have less ability to make changes to the property. Commercial tenants often have some amount of leeway to redecorate or even refit their space, but they cannot make major renovations without the building owner's approval.
Limited optimization of property income
The same is true regarding opportunities to optimize profits based on your location. You may be unable to make alterations for additional profit.
Rent expenses without equity or appreciation
While your payments are predictable and lower than the purchase costs, longer stays provide less profit overall because you don't gain equity with each rental payment or benefit from property appreciation.
Buying commercial real estate: Pros and cons
Purchasing commercial property is often considered a valuable long-term investment, whether you're buying a location just for your business or a property large enough to lease additional business units. Buying your commercial property gives you the opportunity to take control and make bigger decisions about optimizing your profits, but it also adds far greater initial expenses and long-term responsibility for the location.
Pros
Complete control over the property
When you own a commercial property, you can alter and upgrade it in whatever way provides the greatest benefit to your business. For unique business models and branding designs, this can make commercial property ownership a desirable option.
Property appreciates over time
Commercial property in Fort Worth reliably appreciates over time. This means that you have the opportunity to sell at a profit in the future or lease additional space in your commercial property for increasing rentals as the value rises.
Opportunity for rental income
When you own commercial property, you can make additional income by renting out any space that is not being used for your business. Larger properties can lease individual commercial units to shops, offices, restaurants, or warehouse spaces to bring in passive and active income streams.
Property income optimization
As the property owner, you can optimize more than just whole units. Renting out parking spaces, building lockers for temporary use, leasing booth vendor space, or offering paid concierge services in the lobby are all potential income opportunities when you fully control the space.
Tax breaks for interest, depreciation, and nonmortgage expenses
Last, commercial property owners in Fort Worth can seek tax breaks for expenses that aren't direct mortgage payments. Interest on your mortgage, property depreciation, and business expenses related to running the building can often be deducted.
Cons
Upfront investment costs
The most obvious downside of buying commercial property is the initial expense. The down payment, closing costs, and hit to the business’ credit score will impact finances before profits are made off the property. Additionally, initial capital outlay diverts cash that could be used towards other operations or investments.
Less available capital
As a result, your business will experience less available capital moving forward from the building purchase. This is why purchasing decisions are often made by established companies with built-up revenue and credit scores rather than startups.
Responsibility for tenant services
If you choose to lease additional space in your commercial property, you take on the responsibility of a landlord. You'll need to provide reliable services and respect the terms offered in each negotiated tenant lease contract, or they will have grounds to break the lease.
Potential for loss
As with any investment, when you purchase a commercial property, there's potential for loss should something cause the value of your property to depreciate.
Extensive insurance and regulation requirements
As might be expected, owning commercial property in Fort Worth requires extensive insurance and regulatory requirements regarding liability, maintenance, sustainability, impact on city infrastructure and zoning, as well as tenant health and safety liability.
Inflexibility
Space acquired may not be reduced or enlarged to keep up with the fluctuation of a business’ demand in planning, growth, risk or financial responsibility.
Discover your ideal commercial property with Stephanie Bunn
Space acquisition for lease or purchase has many details and nuances to consider. A knowledgeable commercial agent will advise and support you through your options based on the goals and best interest of your business. Stephanie Bunn is an enthusiastic commercial real estate agent passionate about helping businesses find the ideal location at the right price through financial modeling. Whether your business is seeking a strategic leasing opportunity or the perfect building to buy, Stephanie has the energy and expertise you need. Discover locations that optimize your budget. Contact Stephanie Bunn for Fort Worth commercial real estate opportunities today.
*Header photo courtesy of Shutterstock
