May 25, 2018
Many factors play into a company’s decision to either buy or lease their industrial facility. The benefits and negatives for each method vary greatly and need to be considered before making an offer on a property.
What is Industrial Property?
Commercial property, also called commercial real estate, is a property built and used for business purposes. Industrial property is a particular type of commercial real estate used for industrial purposes such as manufacturing, storage, and more. Industrial property can range from a small storage facility or warehouse to a large manufacturing plant or site. Industrial spaces differ from the other two types of commercial property which are retail and office spaces.
Industrial Real Estate in Denver
The commercial real estate market in Denver is considered especially competitive, including the market for industrial property. Denver’s robust industrial real estate market experienced significant growth in 2016 and 2017. Industrial and warehouse spaces continue to experience a low vacancy rate in the Denver region.
At Denver Commercial Properties, we have over 50 years of knowledge and experience in the Denver commercial real estate market. We have the inside track and skill set to help you navigate through the options for your industrial space, whether you are seeking to lease or buy industrial property.
Leasing Industrial Property in Denver
The option to lease industrial property has several significant benefits. Chief among them is the lower start up cost or capital outlay. The cost is estimated to be one-sixth of the cost of purchasing a commercial space. This provides your business with more capital and liquidity up front. Tax savings can also be significant with leasing as you can often deduct the entire cost of your lease payment. You also have less risk as well as growth as you are not tied to the property long term as you would be if your purchased it. If your needs change, you can seek out a new property at the end of your lease.
A lease has some drawbacks. A lease has little investment potential as you will not be able to resell the property for a profit or build equity. You also will not have the option to lease the property out for additional income. The lease payments are typically higher than the payments on a property you own. You also sometimes have limited control over the property, with your lease requiring changes to approved by the owner or landlord.
Buying Denver Industrial Property
Equity and asset appreciation are the two most readily obvious benefits of buying an industrial space in Denver. Your monthly payments build your equity in the property as opposed to lease payments that will never be recouped. Rental income and tax benefits through interest deduction are two other positive aspects of purchasing a site for your industrial business. You also have the ability to make changes as you wish to property you own in order to better meet your company’s needs.
However, buying is not without some drawbacks. Buying Denver industrial property requires a more significant cash outlay in the beginning although your monthly payments are typically lower than they would be if they were lease payments. As the owner, you also have increased risk and liability if an accident occurs or if the market causes the value to decrease.