Should a Business Buy Its Own Building?


by Bill Conerly

Source: Forbes.com

Should a business buy its own building in this market? A small business owner recently asked me that very question. I think it’s a great idea to consider in many areas, given the weak real estate market, but it’s not a slam dunk decision.

Commercial Real Estate Prices

Prices for real estate are soft in most parts of the country, and that’s true for commercial and industrial properties as well as houses (as of December 2011). The non-residential real estate sector was not overbuilt as housing was. When the recession came, however, businesses cut production, laid off staff, and in some cases plain went out of business. That clobbered occupancy of non-residential properties. With higher vacancy, the landlords cut rents to attract tenants. The result has been lousy operating earnings for property owners and thus falling prices.

Last January (2011) I offered this advice:

 

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