Starting Your Project: To Lease or To Own?

A Q&A with Mike Bonnett

JEDCO Board Member and Vice President at Landmark Brokerage Services

What advice would help a client deciding between acquiring undeveloped land or existing space?

There are several factors to consider here. First, how soon till the space needs to be occupied? A typical office space can be occupied between zero and 90 days after signing a lease depending on the scope of work to be performed. Also, leasing frees up working capital that can be used to reinvest in growing the business.

Alternatively, deciding to build pushes the occupancy date. Once the land has been acquired, it typically takes between 12 and 18 months to get a certificate of occupancy. Owning a building requires more capital investment, not to mention additional time and energy that can pull focus away from managing the core business. Also, will owning provide the flexibility needed for future business growth?

What details should a client provide to a broker for the most comprehensive analysis and detailed recommendation moving forward with a project?

There are many details needed for a broker to conduct a successful property search:

• Is leasing or buying more appealing?
• What is motivating the move? (Location, out of space, amenities, employee retention/attraction, investment, etc.)
• What type of space is ideal? (Size, layout, amenities, use, etc.)
• What is the company’s growth projection, using staffing and space guidelines.
• What is the time line?
• Who are the decision makers, and what is the decision-making process?
• What is the budget? (Provide a comfortable range for a monthly or annual budget. Define all expenses included in this number.)

From inquiry to closing, how long does it typically take to acquire a property?

Timing can vary depending on whether one leases or buys. Leasing requires the least amount of time and can be done in a matter of days. When purchasing a building, there is generally a due-diligence period of 60 to 90 days with closing to follow within 30 days. Purchasing land takes the most time, requiring a longer due-diligence period to ensure the land can be developed with proper zoning for the intended use. This takes on average 180 days for due-diligence with closing to follow within 60 days.

How do you recommend eager entrepreneurs explore available sites and buildings?

Start with hiring an experienced commercial real estate broker that can assist you with your property search and negotiate on your behalf. Leasing or buying commercial real estate is one of the most important decisions you will make for your company. Commercial real estate is a complex industry and has many market factors impacting it daily. Putting a broker to work for you will save you time and money because a good broker knows the market. They know who the owners are, what’s coming available, and what the market rents and sale prices are.