Everything you ever wanted to know about commercial real estate
How do you choose the ideal location for your business? What does moving to new offices involve? How can you save the most on management resources, time, and money? And what’s the connection between the color of your office walls and your success? This is your complete guide to commercial real estate.
*The aforementioned information does not constitute binding and/or comprehensive advice and/or a recommendation. It is provided solely as marketing information and expert advisors must be consulted on your behalf, prior to performing any transaction, including in connection with any of the aforementioned information.
What’s better: buying or renting commercial real estate?
Deciding whether to buy or rent commercial real estate is a significant process that, naturally, can only be made in line with your personal needs and expectations. Without pretending that we know all the ins and outs of your individual circumstances, we have tried to present a number of benefits for each option, which we hope will assist your decision-making process and help you make the right choice for your future.
Advantages of renting property:
- No need for an initial equity investment.
- Tax considerations: Unlike the cost of purchasing a new office, rent is fully recognized as a business expense. Rent is deducted from your profits and means you can pay less in taxes. When purchasing an office or commercial space, you will only be able to receive a tax refund on a small part of the purchase fee after a lengthy period.
- Maximum flexibility: Renting makes it easier to adapt your office space to the changing needs of the business over the years. For example, if your business changes its activities or has significantly more or fewer employees, you can simply rent a different property.
- Rents do not always reflect the true value of the property. So, those who are currently renting at prices that are relatively much lower than the property value will probably prefer to keep renting.
Advantages of owning property:
- No need to pay rent. Your mortgage payments, if required, will make you the owner of the property over time.
- Freedom to sell the property at any time and enjoy a capital return on your investment.
- Option to generate income by leasing out the property.
- Option to use part of the property while leasing out another part, thereby generating additional income and retaining maximum flexibility in adapting the property to your future business needs.
What needs to be considered when moving to new offices?
- Moving to new offices involves a large number of decisions and considerations. Beyond making the initial decision to move, a variety of other questions will arise: Where should we move? When? How big an area do we need? Should we buy or rent office space? How will the transition affect relationships with customers, suppliers, and employees? How will the logistics of the move be managed and by whom? This can include sorting, packing, transporting, unloading, organizing the new office and work stations, hooking up computers, installing electrical equipment, and setting up the cabinets, shelving, furniture, and more.
All in all, it can be a major headache. But moving to new offices is also a wonderful opportunity to gain offices that are perfectly adapted to your business’s values and needs, both today and tomorrow.
When should you move to new offices?
Wondering if you should stay or go? The decision to move is a complex decision on both a personal and professional level, but there are various circumstances in which it is worth giving a move serious consideration:
- The number of employees has increased, or is expected to increase, and the current office space is too small.
- The current office space no longer suits the company’s line of business or the way you want customers to perceive you.
- The location is not convenient enough for your employees, suppliers, or customers.
- The infrastructure at the current location is not suitable for the evolving needs of the business.
- Resource consolidation – over the years you have added many “temporary” fixes and now your offices are located on different floors, in different buildings, and even in different cities. Moving to new offices that enable the whole organization to work together in one location could be a solution that is worthwhile considering.
- Your lease at the current property has ended, or is about to end, and you are not able to / do not want to extend it.
- Your business is located in an outdated building that requires significant investment in renovation and maintenance, in terms of both financial resources and time (working days, management resources, etc.).
- Expansion in your business activity or, alternatively, streamlining or downsizing processes.
- You have reached a natural stage in the evolution of the organization.
- Future expected growth or shrinkage.
- Incompatibility – your offices do not reflect the company’s values, corporate culture, or the image you want to convey.
- Employees are not satisfied with the office conditions, services, or location (access to public transport, parking issues, etc.).
How do you choose the ideal location for your business?
When moving to new offices or a new commercial complex, one of the most important and complex decisions is the choice of location. Here we have gathered several issues you should consider before coming to a decision:
- Distance – It is important to take into account where your employees live when choosing a location for your new offices. The more staff you have, the more difficult it is to move away from major cities, because the location must be attractive to a large number of employees. On the other hand, those companies that do decide to move out of the central region are often able to hire high-quality staff at a generally lower cost.
- Cost – Due to high demand and high occupancy rates of offices in Israel’s central region, office prices and rents in city centers and the most in-demand industrial areas (Ramat HaChayal, the Bursa, Raanana and Kfar Saba business districts, Rehovot Science Park, etc.) continue to rise every year. This is why many companies are electing to leave the central region and establish their headquarters in areas where they can enjoy larger and more modern new offices at significantly lower costs.
- Taxes, Fees & Tax Benefits – Local taxes can be a major expense for businesses, especially in the case of large companies that require thousands of square meters of office or logistics space. It is therefore vital to check local tax rates in advance, when considering relocating to other cities. In most cases, you will find that the further you get from the central region, the lower the tax rates will be. You may even be able to enjoy tax benefits in certain areas where the government wants to stimulate growth.
- Accessibility, Traffic Jams & More – Accessibility is a make or break factor for your office location, for employees, customers, and suppliers. When employees have to deal with traffic jams that amount to 3 hours of commuting every day, their wellbeing, satisfaction, and efficiency suffers as a result.
- Ease of access to public transport, the train, and the light rail.
- Parking – Parking solutions for employees and visitors.
- Proximity to Customers, Suppliers & Infrastructure – Ask yourself how important it is to be close to your customers, your suppliers, or other services and required infrastructure. This can be a major factor in deciding where to locate your new offices.
- Attractive Work Environment for Employees & Customers – A stylish modern complex with a pleasant atmosphere, close to a mall, shopping center, or commercial boulevard (stores, cafes, restaurants), gym, pool, park, and so on, will help your employees feel more satisfied and spend less time on the road, and more time at work. For your customers, offices that reflect the nature of your business and position it correctly will become an important, inseparable part of your image, as well as playing a significant role in their decision to do business with you.
- Municipal services provided in the city you are considering.
- Image & Promotional Considerations – A location, such as a busy intersection or main road, can be a competitive advantage and enable promotion through prominent signage. Alternatively, a location in a successful commercial center or on a bustling street can promote interaction with customers for stores, service centers, and restaurants.
- Think About the Future – Options for the future are another important consideration when selecting your new location. Do you have the space to expand if you want to do so in the future? Is this an area with growth potential? When you want to sell (if you own the property), will you benefit from price increases in the area?