6 Reasons To Consider Leasing vs. Buying

Written by: Fargo Inc Staff


McKenzy Olson

VP Marketing and Public Relations

Blake Nybakken

Vice President of Development at EPIC Companies

1. One of the largest reasons renting has its perks versus buying is that, in most cases, all snow and lawn care and maintenance are on the building owner.

2. If it’s a mixed-use building, commercial tenants have a given customer base with mixed-use tenants living upstairs.

3. Often time, you will receive marketing help through the management team’s social media, websites, email marketing, etc.

4. There is often collaboration and networking with other commercial tenants such as having block parties or hosting events. 

5. There are fewer costs associated with leasing because of the splitting between residential and commercial tenants.

6. If you are a growing company, when you buy, you are somewhat stuck in that square footage. With leasing, you have the option to grow your business by leasing more space or looking for another space that’ll fit your company/business better. 

Q & A

What are the benefits of renting versus buying?

We do leasing options, but we also condo out spaces, which is similar to buying the space. We always look at the option of condoing out to a tenant if they are wanting that so they can own their own property. We have done two leases like this in the past couple years and are currently working on our third space. This is very important even to government, school or university land as they typically only offer a leasing option since they want to keep control of the land that they own. 

How do I know if renting is a better option for me than buying?

One of the top things to think about when weighing the option of leasing versus buying is the location. Once you’ve determined where you would like to be and what it offers then you can start deciding between leasing and buying. Weigh your options and determine your financing. Leasing frees up cash flow while buying controls the land. When you buy, it’s completely expensable. In most cases, specials are lower when leasing unless they are figured into your Common Area Maintenance charges. 

Renting can be a good way to free up working capital. How can that help my business?  

In so many different ways. You could use the extra capital to increase your exposure with some additional advertising or promotional events, expand an area of your business you otherwise wouldn’t have been able to and you can focus on running your business. If you are a tenant (especially in one of EPIC’s properties) everything is taken care of regarding the maintenance and upkeep of the property, so that allows you to focus your efforts on growing your business and taking care of things that make a difference to your own bottom line.    

When negotiating about space, there’s sometimes fit-up funds available. How should the discussion take place between the developer and the business owner and what’s a normal amount of fit-up fees? 

Each tenant is a case by case basis. This often comes up early on during our discussions with prospective tenants as it is an amount that is typically included with the other main terms of our listings (base rent, CAM, number of years, etc). Our properties have a specified amount for fit-up that was budgeted several months before being listed or advertised, so that number is often hard to change. 

However, there are always exceptions, and each property is different. If you have a very desirable business, you may be offered more. If you can’t afford to pay the difference of your fit-up and the allowance, the landlord can sometimes amortize that expense throughout the term of your lease by increasing your rent accordingly. We will help a prospective tenant with schematic design and cost estimates so they get a good idea of what a particular fit-up will cost and that always seems to help.

A typical fit-up allowance for our properties is $25/sf. That amount varies by property and can also be impacted or off-set by other items like the condition of the space delivered by landlord, floorplan, commencement date, etc. EPIC’s fit-up is different with the addition of underground parking on all of our mixed-use building. This creates a different vanilla shell than most strip mall type commercial spaces you see with a dirt floor option you’ll move in with concrete floors already complete.

EPIC Companies’ Pioneer Place building is an example of a mixed-use building in downtown West Fargo. This building has a community room, including a rooftop patio, and overlooks the downtown area. It also has 51 residential units with 13,000 square footage of commercial square footage. They currently have over 6,000 square feet of commercial space still remaining. They are also creating the downtown West Fargo streetscape with phases one to three complete and phases four and five starting in 2020-2021. 

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