Consider these benefits and challenges of condo ownership for your business.
Traditionally, office condominiums have appealed to small businesses, professional firms and medical practices with stable business models.
Market forces that drive interest in office and industrial condos, also called commercial condominiums, are
- historically low interest rates
- certain income tax and financial benefits to owning rather than leasing
- competition among bankers to sell Small Business Administration loans
- pride in ownership.
Business owners take pride in the appearance and functionality of their offices because their premises reflect the quality of the goods or services they provide.
Small business owners appreciate the long-term protection from rising rents and the investment value of owning their own business premises.
Commercial condominium ownership is often the best investment choice for the small business owner compared to other purchasing options.
Small businesses, which typically purchase 1,000-5,000 square feet, don’t have sufficient revenues and personnel to occupy an entire building or the entire floor of a high-rise.
We at Commercial Real Estate Group of Tucson ask small business owners to consider the following points while trying to decide whether owning their own space will be beneficial for them.
The key driver of the office condo market is the prevailing rental rate. If new office space is leasing at $25-26 a square foot and a user can buy new office space at $16-18 a square foot, there’s an immediate return on that real estate investment.
Current market conditions are motivating owners to sell at prices that are continuing to fall.
Because of the savings per square foot, many healthcare businesses such as medical practices, laboratories and ambulatory surgical centers find owning office space
- makes financial sense because of the expensive build-out costs
- provides a stable, familiar location for their patients.
Disputes can arise among owners about the costs associated with maintaining common areas, allotting parking spaces or renovations to “freshen” an older building.
When you start dealing with larger users, a condo form of ownership for office buildings becomes complicated.
A condo association can be a distraction from day-to-day business activities.
Finally, office condo ownership raises the question of an exit strategy. What happens when a small company closes its doors or an entrepreneur decides to retire?
Commercial Real Estate Group of Tucson specializes in representing tenants and corporate users across the United States, Latin America, Europe and Asia as a member of ITRA. For more information call 520-299-3400.