Should You Buy Instead of Lease? What Business Owners Need to Know

For business owners leasing commercial property, the last Reserve Bank of Australia (RBA) rate cut may be prompting the question: Is now the right time to buy instead of lease?

Lower borrowing costs make property ownership more affordable, and importantly with commercial loan terms generally increasing from 15 to 30 years, repayments could be more manageable than ever. However, owning commercial real estate comes with different financial and operational considerations than leasing. Here’s what you need to know before making the move.

Weighing the costs: Lease vs Buy

With interest rates dropping, the cost of servicing a loan may now compare favourably with ongoing lease payments—especially if you are facing rental increases. Buying a property means:

• Fixed Costs Over Time: Mortgage repayments offer more predictability compared to fluctuating lease agreements.
• Long-Term Asset Growth: Ownership builds equity, allowing you to benefit from capital appreciation over time.
• More Control Over the Premises: No lease restrictions or rental increases, giving you the flexibility to customise the space for your business needs.

However, buying also means covering maintenance, taxes, and upfront costs such as deposits, stamp duty, and legal fees—expenses that landlords typically handle in a lease agreement.

The impact of longer loan terms

Commercial property loans are now being extended from the traditional 15 years to 30-year terms, reducing monthly repayments and improving cash flow.

Zak Janseki, Commercial Property Specialist from Capita Finance Solutions advises business owners to think strategically about this shift:

"A longer loan term can make property ownership more accessible, but it’s important to look at the full picture. Lower repayments can free up capital, but the total interest paid over time is higher. Business owners need to balance affordability with long-term financial impact."

Why businesses need to move now

In the current market, business owners who are considering purchasing should act decisively. The commercial market is seeing a rise in strategic expansion, with businesses looking to purchase adjacent properties, or larger premises to solidify their long-term footprint.

Rob Dawson, Realmark Commercial Industrial Specialist, is seeing more businesses take this approach in the current market in particular in industrial area:

"Now is the time to be strategic. We’re seeing businesses expand within their existing locations, look to secure larger sites to future-proof their operations. Even land banking an opportunity by waiting out a lease tail from a sitting tenant. Business is recognising that well-located commercial property is only getting harder to secure. If you don’t move now, you may find yourself out of options later."

 If you’re considering buying a commercial property, you need to assess your long-term business growth and how property ownership fits into that plan. Some key questions to ask:

• Will your business outgrow the space in the next 5-10 years?

• Is the location suitable for your long-term operational needs?

• Does owning the property align with your business's financial and operational goals?

For some business owners, the strategy is not just about acquiring a premises to operate from but also about expanding their commercial footprint particularly in areas of high demand. 

Next Steps

Buying a commercial property is a substantial investment, and securing the right finance structure is essential to long-term success. The recent interest rate cut has made borrowing more attractive, but business owners should still carefully evaluate how much they can borrow and ensure that the loan terms align with their business structure. It's important to anticipate potential market shifts that could influence future repayments and to manage cash flow effectively so that day-to-day operational costs are not adversely impacted by property ownership. For those purchasing property as a long-term investment or land banking opportunity, consulting with a specialist is crucial. They can provide insights into the potential yield, current tenant demand in the area, and help assess the level of property management expertise and experience needed to ensure the asset is efficiently and managaed, returns maximised and risk-mitigated.

With falling interest rates and longer loan terms, buying commercial property is more accessible than ever—but it’s not a one-size-fits-all answer. Think long-term, consider your business trajectory, and consult the right specialists before making a move.

Ready to talk options? Contact Capita Finance Solutions in relation to finance options or your Realmark commercial property specialist for further information.