To lease or own

To Lease or Own?

In a perfect world, the decision to lease or own your facilities is easy.  Simply, compare discounted cash flows and select the more cost-effective option.

Why not?  In minutes, you can easily analyze your opportunities using popular software and spreadsheets.

Your challenge isn’t finding the right package to normalize costs for leasing or owning your facilities.

Your challenge is the assumptions:

Correlating your occupancy and financial objectives as they appear today, with property and capital market conditions over time.

Factors to Consider

If your decision to lease or own facilities is strictly economic, owning is usually more cost-effective, assuming modest appreciation.

Your criteria, more than likely, hinges on a variety of economic and qualitative goals.

The following lists illustrate key factors to consider as you develop and analyze your options:

Factors Favoring Ownership

Economic: appreciation, eliminating market rent exposure, income from tenants, local incentives, favorable financing, land cost

Use: specialized and predictable space requirements, exit strategy

Control: ensuring long-term occupancy, managing growth

Qualitative: proximity, workplace, branding, culture, amenities, services

Factors Favoring Leasing

Financial: strong return-on-assets, weak market, preserving capital & credit lines, balance sheet

Flexibility:  changing business needs, growth and contraction, managing obsolescence

Timing:  ability to occupy quickly

Operations: focus on core business, not management

Your choice to lease or own pivots on your assumptions.  These occupancy and market predictions establish the framework and, ultimately, sway your choice and total cost of occupancy.