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Paso Robles Retail Building Leases

jmckinny by jmckinny

Paso Robles Retail Building Leases

Learn about the potential benefits of leasing a retail location in Paso Robles, a city with a robust business district within San Luis Obispo County in Central California. Decide if you should lease or purchase your next retail building on the Central Coast by analyzing key variables and recognizing important factors to consider. Take a look at some related lenses covering the Paso Robles financial outlook and economic forecast, and please leave any questions or feedback in the comments section below.

Introduction

Why Paso Robles?

Paso Robles circa 1930Paso Robles is becoming one of the most promising locations on the Central Coast for many retailers. With many economic indicators pointing towards a robust recovery, Paso Robles stands to benefit from many important factors related to economic development in California. Given this understanding, when looking for a retail building in Paso Robles, the question soon becomes: should I buy or lease?

There are several significant variables to consider when making this decision. While these variables apply to nearly every potential retailer, the order of importance for these variables will be unique to each retail building decision. Before you decide to lease or buy, consider these factors:

Capital Availability

Paso Robles, CaliforniaThe most obvious variable to consider is the availability of capital. Even with support from organizations like the SBA, being able to invest funds into a down payment for a retail building is definitely a unique trait in this economy, and finding lenders willing and able to finance the remainder of the purchase amount can be very difficult. Retail building leases are a practical alternative, and for many, it may be the only available opportunity.

Annual Cost

In the current economy, no retailer can rely on the traditional assumption that the annual cost of ownership for a retail building will be less than the annual cost of a lease. In the past, it was generally true that a mortgage and property taxes would be less than a lease on an equivalent building. As a result, many investors chose to purchase a retail property, and then lease it to a retailer, wherein they could profit from the difference in prices. In today's economy, that is no longer a safe assumption to make. While it is still possible on a case by case basis, prospective retailers should look at the relationship between annual costs much more closely. There are a number of circumstances where a building owner will be willing to take a short term loss by leasing their retail space for less than the cost of their mortgage.

Flexibility

The Central Coast is famous for its world-renowned wineries and tourist attractionsReal estate transactions across the US have slowed in recent years, and Paso Robles has been no exception. While being able to purchase a retail building in a down market is a huge advantage, a slow market can make it more difficult to sell that investment in a short amount of time. Leasing a retail building instead offers a considerable amount of relative flexibility.

Economic Uncertainty

Many retail building owners are unfortunately in a position where the cost of their mortgage, property taxes, and related expenses exceeds the potential value of a lease. While many economic indicators point towards a gradual recovery for Paso Robles and the Central Coast, uncertainty still exists. To hedge against these risks, leasing a retail space can often be a safer alternative to ownership.

Retail Business Growth

If there is a realistic possibility that a retail business will outgrow the confines of a building within a relatively short amount of time, leasing could be a superior alternative to buying. If not, a retailer may need to purchase a more expensive building that exceeds their current needs, and then allow the business to gradually grow to fit the space. By leasing, a retailer can accommodate their growth potential by moving to a larger building once the need arises.

Conclusion

These variables should be considered when making the decision of whether to buy or lease a retail building, and while these factors are not collectively exhaustive, they are significant. By using these variables in the analysis of your next decision, you can make a stronger, more strategic long term judgment.

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jmckinny

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