Should You Rent or Buy a New Office Space?

Q: I need a bigger office/warehouse space. Should I rent or buy?

A: A lot depends on how long you’re planning to stay and how much capital you’re willing to tie up.

Unlike a house where you may live for the next 20 years, an office or warehouse space must meet the needs of your business--and those needs may change over time. For example, if you have 25 employees now but plan to be at 100 by this time next year, you need to buy an office building that’s large enough to accommodate your company’s growth.

Companies need to think strategically about their real estate needs before investing in a building, warehouse or other asset that will tie up their capital and saddle them with debt, says William Goade, CEO of CresaPartners, a Boston-based corporate real estate advisory service that helps businesses with site selection, relocation planning and project management.

While it may make sense to own the building that houses your main headquarters, you’re probably better off leasing space in cities where you have smaller offices with fewer staff, Goade says. Also, with the subprime credit crunch affecting all aspects of the economy, businesses looking to lease space may find some good deals available over the next 12 months. Goade predicts a 10 percent to 20 percent decline in office rents nationwide in the coming year. "We're telling clients to wait as long as they can to commit and advising them to go with a shorter-term lease if they can," he says.