The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
As one of the most active contributors to the national economy of the United States, the commercial real estate sector is also one of the most dynamic. Companies that need to establish a physical presence have quite a few options to choose from; they can rent space, enter strategic partnerships, share their revenues with the property owners, or simply develop and build their own spaces. In many cases, the last option is the best option, and you can easily understand why after reviewing the four reasons listed below:
Since 2018, the costs of building new commercial spaces, particularly for offices, have favored the business sector. This has a lot to do with the extraordinary demand for new residential construction that the American real estate market has experienced. In some cases, building new facilities makes more sense than remodeling existing ones because of pricing issues.
For established brands, this is often the most important aspect of building versus renting or purchasing existing properties, especially when it comes to establishing headquarters offices. Major brands such as Apple, Google, and McDonald’s have maintained their main corporate offices on the same land for decades, and the architectural styles they selected have become iconic. When expanding their regional offices, these companies prefer to rent existing spaces in the beginning; once they establish a strong foothold, they look for development opportunities.
Any seasoned commercial contractor can tell you about the ROI realized by clients who chose new construction instead of remodeling or purchasing existing structures. In some cases, new buildings offer the potential of being rented out in the future, which means that the company becomes a property manager and a real estate investor. In essence, we can say that this is a way to diversify asset portfolios and income-generating sources.
This consideration is related to the ROI factor mentioned above. Not all companies choose new construction; in fact, most of them will opt for renting or purchasing existing structures for demolition or renovation because they believe in the real estate axiom of prime locations. When you choose to build, you are effectively creating an opportunity to turn the spot into something that will be considered a prime location in the future, thus increasing the overall value of your asset portfolio and setting you apart from competitors that do not hold commercial real estate assets.
In the end, companies that adequately plan the construction of new facilities will come ahead in the long run. Don’t forget about the ever-present aspect of the financing, which is not difficult to obtain for commercial construction projects.
About the Author
Kara Masterson is a freelance writer from Utah. She graduated from the University of Utah and enjoys writing and spending time with her dog, Max.