FTI Experts’ Hub: To Buy or to Lease? That Is the Question

With property valuations at historic lows, buying office or retail space instead of leasing it might make a lot of sense today. But there are lots of caveats to it.

Shifting from owner to occupier has many implications and requires a different skillset than managing a portfolio of leased real estate. However, a long-term commitment to a specific location—probably a company headquarter or a flagship store—is a good enough reason for a tenant to purchase the space. Nevertheless…

“There are real risks and concerns. This is not for everyone and certainly not for under or marginally capitalized companies,” said Jahn Brodwin, senior managing director & co-leader of the Real Estate Solutions practice at FTI Consulting in this podcast.

This is definitely not a new trend, but it can be a win-win for both tenants and landlords in today’s unpredictable CRE landscape. And the next 12 to 18 months will continue to be an opportune time to consider this option, but a lot could change depending on actions by the Fed and policy at all levels of government, according to Rob Raymond, who serves as managing director in the Real Estate Advisory group within the Real Estate Solutions practice at FTI Consulting.

If you’re contemplating transitioning from tenant to landlord, press play and listen to this episode of FTI Experts’ Hub, the quarterly podcast series with FTI Consulting specialists, hosted by Commercial Property Executive Senior Editor Laura Calugar.

Here’s a snip of the main talking points:

• The CRE market more than 4 years since the onset of the pandemic (0:58)
• How much have property values changed? (2:25)
• The elements that should tell an occupier that they should consider purchasing (3:54)
• Implications of becoming an owner (6:21)
• Risks and concerns (7:37)
• Find the capital necessary to purchase space (9:40)
• Tax implications (12:54)
• Real-case examples of successful transitions (15:52)
• Expectations (18:17)
• Navigate through uncertainty (20:47) 

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