Written by Logan May and Nick Candelari
In today’s rapidly evolving commercial real estate market, businesses face a critical decision: should they lease office space or consider purchasing a building for their operations? Both options have distinct advantages, and the choice ultimately depends on the specific needs, financial situation, and long-term vision of your company. As a Fort Worth-based commercial real estate expert, I’m here to help you navigate this decision by comparing the two paths and highlighting some recent market trends.
Leasing: Flexibility with Rising Costs
Leasing office space offers flexibility, which is crucial for companies expecting rapid growth or changes in their business model. The ability to relocate or expand without the commitment of ownership can be a significant advantage. However, data indicates that leasing costs are on the rise, especially in high-demand areas like Fort Worth.
According to the Building Owners and Managers Association (BOMA), operating expenses that are passed through to tenants have increased by nearly 7% year-over-year. Additionally, as parking costs continue to rise—now averaging around $150-$325 per month per space in major Texas metros—businesses are feeling the pinch even more.
While leasing provides the benefit of lower upfront capital requirements, these increasing expenses can eat into profitability over time, particularly in a market where landlords are passing on a greater share of these costs to tenants.
Buying: Investing in an Appreciating Asset
On the flip side, purchasing an office building can be seen as an investment in a long-term asset. Real estate has historically been a hedge against inflation, and owning a property allows your company to benefit from asset appreciation. In Texas, commercial properties have appreciated at an average annual rate of 5-8% over the past decade, even considering market fluctuations.
Moreover, with recent interest rate adjustments by the Federal Reserve, borrowing costs have decreased slightly, making financing more accessible for qualified buyers. For businesses with stable cash flows, locking in a lower mortgage rate today could result in significant savings compared to leasing, where rental rates may continue to escalate over time.
Ownership also offers potential tax benefits, such as depreciation deductions and the ability to deduct mortgage interest. Additionally, companies that own their property can build equity over time, which can be leveraged for future investments or expansions.
The Parking Dilemma: Another Consideration
A notable concern for companies leasing office space is the rising cost and limited availability of parking. In many leased office buildings, parking spaces are often included in the lease agreement at a premium, or they are provided at an additional cost. As urban areas in Fort Worth continue to develop, parking availability is shrinking, driving up costs and potentially causing logistical headaches for employees and clients alike.
In contrast, owning a property allows for more control over parking arrangements. You can tailor the parking setup to meet your company’s specific needs, often at a lower overall cost.
Weighing the Pros and Cons
Here’s a summary of the key points to consider:
Conclusion: Is It Time to Consider Buying?
Leasing remains a viable and often advantageous option for companies that need flexibility or prefer to keep their capital free for business operations. However, with rising leasing costs and the potential for asset appreciation, purchasing an office building is becoming an increasingly attractive option—especially in a market like Fort Worth where demand continues to grow.
At NAI Robert Lynn, we specialize in helping businesses evaluate their real estate options. Whether you’re considering leasing or buying, our experienced team can provide you with detailed market insights and tailored advice to meet your company’s needs. Let’s connect to explore which option aligns best with your long-term strategy.
If you’d like to discuss this further or need help evaluating a specific property, don’t hesitate to reach out.
Logan May: Office 817-872-3909 | Mobile 325-642-4312 | lmay@nairl.com
Nick Candelari: Office 817-872-3905 | Mobile 832-474-7434 | ncandelari@nairl.com
