Renting vs. Buying Commercial Real Estate in Vermont & New Hampshire

Renting vs. Buying Commercial Real Estate in Vermont and New Hampshire

It’s hard enough to find the right property for your business. How do you decide if you should buy or lease commercial real estate? Of course, there are pros and cons with both options, including the opportunity to build equity and profit off a future resale that comes with buying property. In this guide, we’ll walk you through the step-by-step process of figuring out whether to rent or buy, and then how to secure financing for a purchase if you go that route. As always, our friendly and experienced Commercial Lending Team is here to answer any questions you have.

Renting Commercial Real Estate: Pros and Cons

Renting commercial real estate can be less costly up front, but it may have you miss out on potential financial opportunities for your business in the long run.

Learn about the potential benefits of renting commercial office or business space.

  • Lower upfront costs (security deposit and first month’s rent instead of a down payment and closing costs)
  • No ongoing maintenance costs after you’ve set up the space the way you want it
  • If you outgrow your space or don’t like it anymore, you can move when your lease is up
  • Access to desirable locations/buildings that may not be for sale

On the other hand, keep these possible downsides in mind as you decide.

  • No opportunity to build equity or benefit from capital appreciation
  • No passive income from renting out part of your space to others
  • Monthly rent expense never goes away, unlike if you pay off a commercial mortgage
  • May have upkeep expenses on some leases
  • Potential for rent increases (potentially annually, cost variability becomes a possibility)

Buying Commercial Real Estate: Pros and Cons

Weigh the pros and cons of buying commercial real estate below to see if it could be a good fit for your business.

Leaning towards purchasing a space of your own in northern Vermont or northern New Hampshire instead of renting? The advantages for your business include:

  • Build equity as you pay down your commercial real estate loan and the property value increases
  • May be able to take tax deductions for interest, depreciation, and other expenses
  • More control over the property and decisions about your office/business space
  • Potential for passive income from renting part or all of the space to others
  • Any improvements you make to the space will add value for you as the owner
  • Fixed monthly mortgage payments instead of variable rent costs

On the other hand, buying commercial real estate may come with some or all of the following challenges:

  • Up-front down payment will range from 10-25% for an existing structure and roughly 40% for land, as well as closing costs and other fees
  • May have trouble qualifying for a commercial real estate loan
  • Ongoing maintenance costs
  • Less flexibility to move
  • Liability

Commercial Real Estate Trends in New Hampshire

Be sure to stay up to date on the current commercial real estate market using the resources below.

The pandemic has disrupted the commercial real estate market across the country, making it hard to predict trends in northern New Hampshire. When making your own decisions about investing in commercial real estate or purchasing a property for your business, take your time to do the research and pay attention to current labor trends, tenancy rates, and real estate prices. Helpful resources include:

  • LoopNet’s Market Trends provides commercial real estate statistics dating to 2006 for several New Hampshire metro areas.
  • The Federal Reserve of Boston publishes a monthly economic summary for New Hampshire with data on income, housing permits, exports, etc. The Federal Bureau of Labor Statistics updates New Hampshire labor data each month as well.

Commercial Real Estate Trends in Vermont

For those looking to take their next step in researching commercial real estate in Vermont, there are similar resources available that can help you learn more:

  • LoopNet’s Market Trends also provides commercial real estate statistics dating to 2006 for several Vermont metro areas.
  • The New England Real Estate Journal provides content that encompasses 2021 updates on the northern VT commercial real estate market.
  • Similar to New Hampshire’s resources, The Federal Bureau of Labor Statistics updates Vermont labor data each month as well.
  • The Vermont Business Magazine covers the state of commercial real estate across multiple regions, including Burlington and South Burlington.

Legal Considerations

If you decide to purchase commercial real estate in northern Vermont, make sure you’re aware of the legal responsibilities and considerations.

  • The Vermont Landlord Association (VLA) is a trade association representing commercial landlords.
  • In Vermont, commercial and nonresidential property owners may charge rental application fees.

Financing Options for Commercial Real Estate

A local financing partner can help guide you through the commercial real estate buying process.

Real estate is a local business, so when you’re looking for a commercial land loan or other type of commercial real estate loan in northern Vermont or northern New Hampshire, you want to work with a local bank who knows the market, especially in Coos. Grafton and Carroll county. Union Bank offers a full range of real estate loan options for purchasing and building commercial real estate:

  • Commercial Construction Loans
  • Commercial Land Loans
  • Real Estate Development Loans

Learn More About Real Estate Loans from Union Bank!

As a business owner, you have plenty of options for your business’s headquarters/home base. So, consider what is best for your needs when deciding between renting and buying. Still have questions or ready to start exploring the buying process? For more help with the buying process, Union Bank is here to be your local commercial real estate expert for northern Vermont and northern New Hampshire, including Coos, Grafton and Carroll county.

At Union Bank, our real estate development lenders provide personalized service throughout the application process. We are here to answer your questions, help you complete your paperwork, and more.

Stay Local with all of your Real Estate Loan needs and Go Far!

Want to learn more? Get in touch with our Commercial Lending Team and we’ll walk you through the best options for your business needs.