Renting versus buying office space in Cape Town
Is it a smart business move to sign a lease, or will you benefit more from owning a commercial property in Cape Town? To answer this we look at general pros and cons and specific market facts for the Cape Metro.
Owning Commercial Property
Owning your property means paying off an appreciating asset and accumulating wealth over time. The bank likes seeing financial strength in your tangible asset, it forces the business to save and you have the power to do with your property whatever you please.
However, the value might also decrease causing your investment to shrink. Your cash flow can also be hurt by your monthly mortgage and capital outlay, which might be larger than rental rates. Sometimes commercial properties might be too big and you will have to rent out the excess space. Ownership also comes with costs such as commissions, transfers, bonds and maintenance. Owning restricts the companies’ flexibility and possible expansion if the company needs to move quickly. Being able to sell when the time is right and not when you need to is a matter of concern for companies wishing to own their own property.
Renting Commercial Property
Renting allows your business the freedom and mobility to move easily. It is possible to only rent space to your exact current size requirements. You will have more money available to invest in growing your business. There are no building related issues to worry about, which leaves you to concentrate on your main business objectives.
On the down side, many leases come with a lot of restrictions and rules that can affect your business. You are at the mercy of a landlord for maintenance and management. Rent can also increase beyond your budget, forcing you to relocate – leaving your customers behind and risk losing business. Understanding your own business and where you forecast your business to be within the next 5 years are key factors in deciding on your rental space.
Market conditions in Cape Town favour both buying and renting. According to property experts, buying commercial property in Cape Town is a very good investment – especially if the property is in a prime location. For those who prefer renting, the current rate of rental increase is around a comfortable eight percent per year.
It seems that business owners in Cape Town can do well by both renting and buying – they just have to determine their priorities in terms of mobility and long term investment and choose their location very carefully.
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