Business and Real Estate Sometimes Don’t Go Together
Updated: Sep 24
The dream of a lot of business owners is to own their warehouse building and operate their business from there. Real Estate in a great creator of wealth and can help business owners create or at least keep wealth over time; even if the business changes or closes. However, it happens often that a business and real estate don’t go together. In this article, we will provide a few questions to think about if your business should own the real estate. You can also watch our video.
1. What’s projected return on the business and real estate?
A lot of businesses can provide a higher rate of return than real estate. Amazon is a good example. They don’t own most of the DC. They know their business generates higher returns on their investment and large capital is not tied for long time. Business owners looking to buy warehouse building should analyze the return for their businesses and compare to real estate. Then see what provides a better return.
2. Would the business grow in the next few years?
If the business is expected to grow in the coming years, buying might not be recommended. Buying will prevent the business from expanding and growing revenue and profits. In this case, it’s better to start leasing and continue to expand as the business scales up.
3. Is the preferred location available for Sale?
A lot of prime industrial real estate is owned by large institutions and not available for sale. This is common in larger industrial markets. If the desired location is not available to purchase, then the business might not be able to expand and continue to grow. If the right location is available for lease, then it’s better to lease it.
4. Is it cheaper to lease than to buy?
Businesses should conduct a Lease vs Buy analysis. The market for industrial buildings continues to be strong and prices keep reaching all-time highs with limited options. Leasing might make more sense and there might be a lot more options to choose from.
5. Does the business require a lot of specialized equipment?
Many businesses in manufacturing and logistics, especially refrigerated warehouses, require large capital investments in equipment and machinery. For these businesses; it might make sense to buy the facility or do a Built-to-Suit. Additionally, depreciation can help with the large investment in equipment.
Hope this is helpful. Our team is experts on Lease and Sales of Warehouse space and will be happy to help you. You can contact one of our team members with any questions or schedule an appointment.