Thursday, October 17, 2013

Small firms discover buying beats renting

Summary:  Rents, apparently, have reached parity with ownership.  Many are incentivized by stabilizing rents and increasing mortgage rates.


Fort Lauderdale --(Sun Sentinel)--
Some small businesses in South Florida are finding it's better to buy than to rent. Entrepreneurs, law firms and marketing companies are becoming their own landlords, locking in occupancy costs before expected increases in mortgage and rental rates, brokers say.

"I think it's indicative of restored confidence in the economy that firms are willing to make longer-term commitments," said George Sacks, managing principal at Commercial Florida Realty Services in Boca Raton.

Commercial Florida has completed a handful of office condominium sales recently at Sanctuary Centre, a 187,000-square-foot complex in Boca Raton. Tenants also are buying at The Exchange, a six-building Fort Lauderdale complex.

PeytonBolin, a seven-attorney law firm in Tamarac, signed a lease in 2008 — during the height of the recession when office rents "were dirt cheap," founding partner Mauri Peyton said.

When it came time to renew, Peyton couldn't get as good of a deal in his building — or anywhere else. The more he looked at the firm's costs, the more he realized it could probably buy space for as much as it could rent it.

PeytonBolin, which represents condo and homeowner associations through Florida, agreed to buy a 6,240-square-foot office suite at The Exchange. Peyton said the monthly ownership costs will be about the same as renting, but the tax benefits make buying the much better bargain.

"Rather than just throwing money away on rent, we're building equity," he said. "We don't have to worry about a landlord or losing our build-out money when we leave."

PeytonBolin and other firms want to act now before mortgage rates inch up further. And commercial rents are due to increase as well, given the lack of construction over the past few years, Sacks said.

Another advantage to buying: A more favorable lending environment, brokers say. Businesses can get up to 90 percent financing on loans backed by the Small Business Administration.

For some, renting is the smarter option for many larger firms and those that crave flexibility.

"If you are uncertain about whether your space needs are going to change, it may not make sense for you to buy," said John McQueston, a broker associate with Campbell & Rosemurgy in Pompano Beach.

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