Leasing a commercial space | Is it the right choice for business?
The ever evolving market trends and the ways of doing business in an economical way have coined the term commercial leasing. But first we must know, what defines a commercial property, the answer is as simple as a riddle, it is a space that is within a real estate & is being used for business activities to generate revenues.
Commercial property may include functions of large malls, corporate offices, and hospitality as well. It won’t be wrong to say, Commercial or Residential, real estate industry attracts NRI investment, which has widened its scope over the years.x`
What is Commercial Leasing?
Given the challenges for business these days, leasing a commercial space seem to be an economical and rational approach. Simply put, commercial leasing is renting out a space to conduct business operations with a mutual agreement. These mutual agreements comprising of array of unique terms and conditions defining the ownership of tasks and duties, is known as Commercial Lease. It is also referred to as long term duration lease and cannot be cancelled by the tenant/lessee or owner/lessor only at the discretion. Commercial lease is quite a complex document which covers or should cover all the trivial aspects from lessor’s and lessee’s perspective.
As an investor, it is suggested to check all the merits and demerits of the commercial lease before the start of the operations to avoid taking any wrong decision. So let’s talk about the advantages, why leasing a commercial property might be useful.
From lessor’s point of view:
1. Leasing has the economic growth potential that is recession-proof and can be maintained while the other businesses are not in good shape. Courtesy to the constantly increasing demand of office leasing as a cost-efficient way of financing. 2. Leasing not only helps in continuous income but also the owner enjoys the benefits of capital appreciation as the price of the property continues to rise over the time. 3. Also the lessor has the benefit of gaining the salvage value of the property. Salvage value is the price of the property after considering the depreciation of over the years. 4. Leasing a commercial property leads to quicker returns on investment as the rental income starts immediately after finalizing the deal unlike other options which are time consuming. 5. Even though the risk of maintaining the property and other liabilities are being transferred to the lesse through the lease, the ownership rights of the property still stays with the original owner that is the lessor. So depending upon the terms and conditions of the lease, the lessor may have the option of selling the property after the completion of the lease.
From lesse’s point of view:
1. Leasing a commercial property to run your business is a very healthy and cost-effective way to enjoy the gains without having to invest in the property from the beginning. 2. It reduces the risk of losing the capital investment while the same can be utilized in other operations of the business to focus on the smooth functioning rather than making huge investments beforehand. 3. Leasing a property also gives you the rights of possession that means maintaining and designing the property as per the choice, which is a very good incentive as one can design the surroundings as per the business’s specific requirements, for e.g. an advertising agency would need a peppy and lively environment to inspire the creativity and energy in its employees. 4. Since leasing a commercial is an economical approach, one of the main benefit could be, the one can start working at the most elite and strong location without having to worry about buying an office in that area that is now being called as a hub (IT hub, Retail hub etc) 5. Lesse also enjoys the benefits of tax deduction since he/she doesn’t own the place and can avail several benefits under tax regimes by showing rentals, which also adds to the revenue of the business indirectly. 6. Lesse also doesn’t have to worry about the change in the rentals even if there is an overall increase in the rentals of the location, as, after finalizing the commercial lease the rental is locked for few years and cannot be changed during the tenure.
Is it the right choice for the business?
Since every coin has two sides there are certain demerits as well but on the whole leasing a commercial property is never a wrong choice provided the lease agreement is thoroughly prepared and the interests of all the parties involved is kept intact with utmost transparency and fairness.
It is always suggested to take legal assistance before making the lease decision as it is known to be a document that contains all the intricacies regarding the agreement that is going to in effect for a long time. Otherwise the overall trend of leasing a commercial property has proven that the option always lead to gains.
Commercial property may include functions of large malls, corporate offices, and hospitality as well. It won’t be wrong to say, Commercial or Residential, real estate industry attracts NRI investment, which has widened its scope over the years.x`
What is Commercial Leasing?
Given the challenges for business these days, leasing a commercial space seem to be an economical and rational approach. Simply put, commercial leasing is renting out a space to conduct business operations with a mutual agreement. These mutual agreements comprising of array of unique terms and conditions defining the ownership of tasks and duties, is known as Commercial Lease. It is also referred to as long term duration lease and cannot be cancelled by the tenant/lessee or owner/lessor only at the discretion. Commercial lease is quite a complex document which covers or should cover all the trivial aspects from lessor’s and lessee’s perspective.
As an investor, it is suggested to check all the merits and demerits of the commercial lease before the start of the operations to avoid taking any wrong decision. So let’s talk about the advantages, why leasing a commercial property might be useful.
From lessor’s point of view:
1. Leasing has the economic growth potential that is recession-proof and can be maintained while the other businesses are not in good shape. Courtesy to the constantly increasing demand of office leasing as a cost-efficient way of financing. 2. Leasing not only helps in continuous income but also the owner enjoys the benefits of capital appreciation as the price of the property continues to rise over the time. 3. Also the lessor has the benefit of gaining the salvage value of the property. Salvage value is the price of the property after considering the depreciation of over the years. 4. Leasing a commercial property leads to quicker returns on investment as the rental income starts immediately after finalizing the deal unlike other options which are time consuming. 5. Even though the risk of maintaining the property and other liabilities are being transferred to the lesse through the lease, the ownership rights of the property still stays with the original owner that is the lessor. So depending upon the terms and conditions of the lease, the lessor may have the option of selling the property after the completion of the lease.
From lesse’s point of view:
1. Leasing a commercial property to run your business is a very healthy and cost-effective way to enjoy the gains without having to invest in the property from the beginning. 2. It reduces the risk of losing the capital investment while the same can be utilized in other operations of the business to focus on the smooth functioning rather than making huge investments beforehand. 3. Leasing a property also gives you the rights of possession that means maintaining and designing the property as per the choice, which is a very good incentive as one can design the surroundings as per the business’s specific requirements, for e.g. an advertising agency would need a peppy and lively environment to inspire the creativity and energy in its employees. 4. Since leasing a commercial is an economical approach, one of the main benefit could be, the one can start working at the most elite and strong location without having to worry about buying an office in that area that is now being called as a hub (IT hub, Retail hub etc) 5. Lesse also enjoys the benefits of tax deduction since he/she doesn’t own the place and can avail several benefits under tax regimes by showing rentals, which also adds to the revenue of the business indirectly. 6. Lesse also doesn’t have to worry about the change in the rentals even if there is an overall increase in the rentals of the location, as, after finalizing the commercial lease the rental is locked for few years and cannot be changed during the tenure.
Is it the right choice for the business?
Since every coin has two sides there are certain demerits as well but on the whole leasing a commercial property is never a wrong choice provided the lease agreement is thoroughly prepared and the interests of all the parties involved is kept intact with utmost transparency and fairness.
It is always suggested to take legal assistance before making the lease decision as it is known to be a document that contains all the intricacies regarding the agreement that is going to in effect for a long time. Otherwise the overall trend of leasing a commercial property has proven that the option always lead to gains.
