During a meeting with a client, he told me, “If I didn’t own my building, I would be out of business”. That’s how important it’s for businesses to own their building. The decision between owning or leasing a property is a critical one, especially for those with a long-term operational outlook. While leasing may seem convenient, owning your own industrial building can provide numerous strategic advantages that contribute to greater stability, flexibility, and financial benefits. Plus, it protects the business from wild rent increases. Here, we explore the compelling reasons why industrial companies should consider property ownership.
1. Financial Stability and Predictability
One of the primary benefits of owning an industrial building is the financial stability it offers. With ownership, businesses can avoid the unpredictability of rental increases that often accompany lease agreements. Long-term leases may promise stability, but they can still subject companies to periodic rent hikes that impact operating budgets. Operating expenses have become a big issue due high increases in property insurance and property taxes. Landlords’ pass these expenses to tenant, on top of annual increases. In contrast, owning a property allows businesses to manage their expenses effectively, as mortgage payments remain consistent over time, providing a clearer financial forecast.
While leasing may seem convenient, owning your own industrial building can provide numerous strategic advantages that contribute to greater stability, flexibility, and financial benefits.
2. Equity Building
When businesses lease a property, their monthly payments contribute to the landlord’s equity, not their own. In contrast, each mortgage payment made by an owner increases their equity in the property. Over time, as property values appreciate, owners can significantly increase their net worth. This equity can later be leveraged for business expansion, capital investments, or other financial needs, creating a more robust financial foundation. Owning the property can also save the business owner from ruin. I’ve seen many businesses go under, but fortunately, the owners held the real estate, which they were able to sell or lease.
3. Customization and Control
Owning a building grants companies the freedom to customize their workspace according to their specific operational needs. Industrial businesses often have unique requirements for layout, equipment installation, and workflow efficiency. This is very important for companies that have refrigeration and or use specialized equipment; also for outdoor storage. When leasing, companies may face restrictions on renovations or modifications imposed by the landlord. Ownership allows for complete control over the space, enabling businesses to tailor it to optimize productivity, enhance employee comfort, and accommodate future growth.
The decision between owning or leasing a property is a critical one, especially for those with a long-term operational outlook.
4. Long-Term Stability
For industrial businesses with a long-term vision, owning property can provide unmatched stability. With ownership, companies can establish a permanent presence in their chosen location without the uncertainties associated with lease expiration or the potential for non-renewal. This stability is crucial for building strong relationships with clients, suppliers, and employees, as well as for creating a sense of permanence that can enhance brand reputation.
5. Tax Advantages
Owning industrial property can also provide various tax benefits. Property owners can often deduct mortgage interest, property taxes, and certain operating expenses from their taxable income. These deductions can lead to substantial tax savings, enhancing the overall financial health of the business. Additionally, as property values rise, the potential for capital gains tax benefits upon selling the property can further incentivize ownership.
6. Asset Appreciation
Real estate typically appreciates over time, making property ownership a sound long-term investment. For industrial businesses, owning their facility means they benefit directly from any increase in property value. This appreciation can be especially beneficial for companies looking to build long-term wealth or considering future expansion plans, as the value of their property can significantly enhance their financial position.
Ownership allows for complete control over the space, enabling businesses to tailor it to optimize productivity, enhance employee comfort, and accommodate future growth.
7. Less Vulnerability to Market Conditions
Leasing exposes businesses to fluctuations in the real estate market. Economic downturns can lead to increased vacancies and competition for rental space, potentially affecting lease negotiations. On the other hand, owning property shields companies from these market vulnerabilities, as they are not reliant on a landlord’s decisions or the overall rental market conditions. Plus, keeping the cost down through ownership, can help a business have a competitive advantage over competitors that lease space.
8. Enhanced Operational Flexibility
Ownership allows industrial businesses to adapt their facilities to changing operational needs without seeking landlord approval. Whether it’s expanding production capabilities, adding new technologies, or redesigning the layout for efficiency, owners can make modifications on their timeline. This flexibility can be crucial in a rapidly evolving industrial landscape where responsiveness to market demands is vital.
Property owners can often deduct mortgage interest, property taxes, and certain operating expenses from their taxable income.
For industrial companies, particularly those with a long-term vision, owning their own building presents numerous strategic advantages over leasing. From financial stability and equity building to customization, tax benefits, and enhanced operational flexibility, property ownership can significantly bolster a company’s competitive edge. While the initial investment may be substantial, the long-term benefits often far outweigh the challenges, making ownership a compelling option for industrial businesses looking to secure their future and optimize their operations.
When speaking with clients, there is often pushback on pricing with comments like, “It’s too expensive” or “We’ll wait until the market comes down.” I always ask, “What’s the cost of NOT buying?” This encourages buyers to consider the situation from a different perspective and to see the potential benefits of buying now rather than waiting.
Our Industrial Team are experts in working with Buyers for industrial properties. Reach out to us to find out the opportunities available in the market and off-market.
The Industrial Team at ComReal specializes on the industrial properties in South Florida. For over 40 years, out team has help users and investors located the right industrial property. Contact us for more information on the market and our industrial properties.
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