Small Business Blog
Should You Buy or Build a Commercial Property?
today at 8:37 am
As the pandemic nears its end, many employers are searching for new commercial spaces in which to conduct business. Whether they’re increasing their inventory, hiring more team members or trying to reach a wider audience, they’ll likely need a bigger, better property.
If you’re in the same boat, you’re probably wondering whether you should buy or build your next commercial space. Luckily, you can gain more insight by taking a closer look at the challenges that come with each option. Understanding and preparing for these potential hurdles will help you make the best decision for you, your employees and your customers.
Challenges of Buying
Whether they’re in need of office space, warehouse facilities or a storefront, most employers will start their search by perusing existing commercial spaces. While doing so may be simpler and more affordable at the offset, buying a commercial property also comes with its fair share of challenges.
Building your own commercial property allows you to choose an ideal site location. However, those who purchase commercial real estate must choose from a limited number of buildings in pre-determined locations.
If the customer base is local, this means finding a building within close proximity to your target audience. Maybe you even want it to be within walking distance. Of course, finding a building that checks these boxes may be quite the challenge when you only have so many to choose from.
Building classifications will also play a major role in choosing the right commercial property for your business. For instance, in a metropolitan setting, you’ll find Class A, B and C buildings.
Those with a higher rating often include high-quality finishes and come with the least amount of risk, while those with a C classification have the highest level of risk and less competitive ability. Industrial buildings and retail stores have their own designations, too, so it’s wise to look into each one’s classification before signing a lease.
Condition and Design
Employers who are looking for high-quality buildings with a certain design might be better off building from the ground up. That’s because these kinds of properties are far and few between, especially if you have a specific layout in mind.
Eventually, you’ll likely have to settle for a building that fails to check all of your boxes. Then, you’ll spend the next few months — and a fair chunk of the budget – remodeling, which costs an average of $200 per square foot.
Challenges of Building
If you decide that the challenges of finding and buying a commercial property are simply too great, you might opt to build your own instead. Of course, designing and constructing your space will allow for more customization and optimization. However, this option still comes with risks and challenges you may have failed to consider.
Construction errors and subsequent repairs will result in construction delays. Material and labor shortages, a lack of personal protective equipment like masks and even inclement weather can also delay the project.
For instance, if temperatures creep into the 90s, concrete can set in two-and-a-half hours. If the team forgot to bring dampening substrate, they may have to postpone the job. Their poor planning will cause non-excusable delays, which could push back the completion date and cost you more time and money in the long run.
Building and Design Errors
No matter how well you plan or how clear your blueprints are, you’ll inevitably have to deal with building and design errors. Construction workers are human, after all, so they’re bound to make a few mistakes.
Unfortunately, those mistakes can be incredibly costly to fix and, if you’re stuck with a bad contractor, you might have to foot the repair bill. Moreover, if workers don’t build something to code, an inspector could fine you and require reconstruction even after the project is complete.
From sudden increases in material costs to bug and rodent infestations, there are a number of things that could go wrong and increase construction costs.
These unforeseen expenses can force you to take out a loan or halt construction altogether if you don’t have the money to pay for them. Therefore, it’s important to leave some wiggle room in the budget to cover emergencies and any unfortunate surprises that you may encounter along the way.
Weighing Your Options
There are few things more exciting than growing your business. However, it’s important to weigh your options and compare the pros and cons before deciding to build or buy.
Which options will best support your company as it grows and expands? As long as you put employees and customers first, you’re bound to make the right choice.
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Martin Banks grew up outside of Chicago and covers all things small-business related, as well as the world’s best hockey team, the Chicago Blackhawks
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