As a small business owner who is interested in owning your own building, you will inevitably face the question: should I buy or build? While both options have pros and cons, you have to examine your current needs and timeline, your financial situation, and plans for the future. Here are a few tips to help you decide if you should buy an existing building or build from the ground up.
Read more: If you are debating between leasing or buying your commercial space, read this article first or contact our team to discuss your options.
Location and Availability
You’ve heard it before – location, location, location. The location of your business is extremely important, especially when you are buying commercial property. Wilmington, NC and the surrounding area prove to be a great place for both small businesses and large corporations. The Wilmington metro area, including New Hanover and Pender counites, has seen a 15.5% growth between 2010-2018. This provides business owners with a great opportunity to set up shop in a growing community.
However, the recent growth and development may limit your options depending on your desired location. When deciding between buying an existing building or taking on a ground-up construction project, work with your real estate agent to see what is available. Some areas may not have land available but may have a suitable building just in need of an up fit. An experienced agent will help you find the perfect property that fits your business needs, timeline, and budget.
Specific Building Requirements and Timeline
If you need a rather standard office space or retail space, it might make more sense to buy an existing building and renovate as needed. Often times, simple renovations will cost less and be completed faster than a ground-up construction project. Of course, renovations can come with “surprises,” so be sure to have a contingency budget.
If your building will require several specific requirements and customizations, it might make more sense to build a new building. A new build allows you to have complete control to design and build exactly what you need. New construction also allows you to take advantage of new energy efficient materials, which can help you save on utility bills. But remember, a ground-up construction project usually takes more time to complete and can be more costly.
Budget and Available Capital
Regardless of if you want to buy an existing space or buy land and build new, you will need to work with your banker to determine your budget and loan options. Depending on your type of business and what you decide – buy or build, you will have different loan options with different terms.
Typically, you will need more capital to take on a construction project. New construction will include several soft costs such as land improvements and surveys, architect fees, inspection fees, and more. Make sure your loan officer allocates funds for these soft costs in the total loan amount.
If budget is a limiting factor, buying an existing building will likely be your best option. Be sure to have a thorough inspection to avoid any costly surprises. If you are renovating, make sure to have a contingency budget set aside for unexpected issues.
Long-term Business Strategy
Buying commercial property is an important step in the life of your business. You are showing your community you are here to stay. You are also locking yourself down to a very specific location and building at least for the foreseeable future. There are several benefits to this like stability and consistency as well as some tax benefits, but before finalizing your plans, be sure to consider your plans for the future.
Does the building give you space to grow or expand while fitting your current budget and needs? How is the surrounding infrastructure? If you need to move in the future, could you lease this space or sell it for profit? While the future is always unknown, you need to make sure the building and location align with your future plans.
When you are ready to purchase commercial real estate for your business, your real estate agent, banker, and if needed, contractor, can help you decide if you should buy or build.
We know this can be a big step for any business owner. If you have questions about the process or are ready to start looking for property, contact our team today. Maus, Warwick, Matthews, and Company has been serving southeastern North Carolina for over 30 years.