Most companies start out by leasing commercial property for their business operations. But, if profits go up and the company is starting to look like a success, some businesses may begin to think about purchasing commercial real estate instead. It's the old "rent vs. buy" situation, and many companies often come to the conclusion that it is simply a better investment, or more cost effective, to own the property where they conduct business.
Financial difficulties can force many companies from all kinds of business sectors to make tough choices in regards to their balance sheets. Throughout the economic downturn of recent years, this has meant that more companies are comfortable standing pat in their current office buildings, regardless of space concerns, because traditionally it has been a very expensive proposition to relocate a company's headquarters or a main office hub. When profit begins to shrink, moving into updated facilities is usually the last consideration in the minds of company decision makers.
Even though our South Florida readers have seen time and time again ample evidence that the residential real estate sector has been performing admirably over the last year or so, it seems that the commercial real estate market is playing catch-up. The numbers concerning commercial property, such as retail sites, industrial property, warehouses and especially office buildings, pale in comparison to the red-hot residential sales and development figures. However, the gap may be closing.