When it comes to running a business small, medium or large, owning an office space is critical. Large corporations usually either rent or own the buildings from where they operate. However, for small, and in many cases medium, sized companies, it is not monetarily feasible. They therefore rent or lease a room, sometimes even a floor, in an office building. This works fine especially when one is a new, inexperienced starter.
A new business person has to not only explore the market, but they also have to judge their own identity in terms of size, which includes target market, employees, etc. For such companies, leasing is a good option as they change multiple locations until they know what exactly they are looking for in an office space. Once they discover an ideal location and are ready for a long haul at that, it is advisable to buy rather than lease. We've talked to Jim Burtnick, a broker, Senior Vice President-Sales at Sotheby's International Realty Canada and a member of our Team Asia, together with Richard Silver and Tracy An.
Condo offices are the perfect solution for people like engineers, architects, law firms, technology companies, doctors and dentists to name a few,
says Jim Burtnick.
Instead of leasing office space for multiple years, and in many cases decades, the smart business owners are realizing that buying a condo-office allows them all the benefits of being in an office building environment but also allows them to"own their future".
The Toronto market is reacting cautiously, though favourably, to this foreign concept that has led to rise of several condo-offices in the Greater Toronto Area (GTA). The trend is even shifting towards owning the property and not leasing. Though the initial investment is a little higher as compared to leasing a condo-office, it is proving to be a smart choice in the long run.
We all know about the explosive growth of residential condos in Toronto—you can see new buildings everywhere you look. While this trend will continue to grow, a new trend has already begun,
Condo-offices are the next wave.
There are several reasons to support owning a property. First of all, you are building an equity by purchasing the office, which you could resell or even use as a retirement nest when you plan to downsize.
When the time comes to retire or sell the business that an owner has developed over their career, with an condo-office, they now have another asset to sell,
In renting, you remain at the mercy of the landlord who can increase the rent when the time comes to renew the lease. This leaves you high and dry with two options—move and incur heavy relocation costs as well as disruption in business, or stay there and keep paying an exorbitant rent (not to mention how dependent you are on the landlord).
Condo-office ownership is not exposed to rising rents that a landlord might charge when the time comes to renew a lease,
In many cases, a business can own a condo-office for less than it costs to rent and know their cost will not rise.
And if the landlord decides to sell the property, you have no choice but to relocate. You do not have any say in the cosmetic appearance of the office that oblige you to abide by the lease provisions. The rules and regulations stated in the lease forbid you to make any changes to the interior of the office, like repainting the walls or changing the carpet as per your colour choice that best reflects the image of your company.
Even while owning the condo-office you may be required to follow the rules of the condo association related to changing the interior. But they are less stringent and much more relaxed when compared to the conditions laid down in the lease. There are added advantages to owning a condo-office.
If you purchase the property on a fixed interest rate mortgage, the payments will remain the same over time. This will give you an opportunity to financially plan and chalk out your long-term budget . When you own a condo office you are not just paying for the property, but also other amenities like a boardroom, conference room, and other facilities like a health club and swimming pool provided in the building.
Toronto has witnessed many new and upscale condo-office buildings that have generated immense interest in market. They are appealing to a cross section of boutique business owners like engineers, architects, law firms, technology companies, doctors, dentists, and many more.
Busy and smart business owners in Toronto are now buying condo-offices and you will see more and more of these in the coming years,
"Why rent when you can own?"
The Hullmark Corporate Centre at the southeast corner of Yonge Street and Sheppard Avenue is a partnership between Tridel Corp. and Hullmark Developments Ltd. It is a mixed-use development of about one million square feet with two towers, 35 and 49 storeys high, and there is also a five-storey podium dedicated to retail.
The first 12 floors of the taller north tower are allocated for 198 office-condo units, with a separate entrance on Yonge Street. In addition to this, the building is comprised of upscale services that include a concierge and access to a conference room. The south tower has 39 office units.
Another example is St. Thomas Commercial Developments at 7 St. Thomas Street, the company's first commercial condo. It is located just south of the city’s fashionable Yorkville district where the company also recently completed a high-end residential condo tower. The nine-storey office-condo is a luxury building at 93,000 square feet and is scheduled to open in the spring of 2016.
The price of a Class A office building of curving fritted glass that is comprised of offices starts at $450,000. It is located behind six 19th-century townhouses that are also part of the project.
However, it is important to be aware of rules, regulations and obligations, especially for those who have not dealt with the condo board before. There are by-laws instituted by the condo board that they practice judiciously.
Like in other buildings, there are some common spaces that are equally shared by the condo office owners. These by-laws provide information on how you can or cannot use the amenities in the condominium as well as how to adhere to the cost.
For example, a condo office owner is responsible when his client(s) damage the common area.
You should also maintain uniformity when it comes to the exterior of the condo. There should be no radical changes on the exit doors and other similarly prominent areas. There are some other requirements in the by-laws that include what types of maintenance or repairs are the responsibility of the management team and who approves these fixes. However, the condo board cannot make any changes without the consent of the office owners who vote on changes affecting their business.
Condo offices are here to stay. Much like residential "own vs. rent discussions", condo offices allow you to build equity while you house your business ventures, especially if your business is smaller and not in need of huge square footage.
In the end, it is up to individual businesses to decide whether to rent or own an office. Having your own condo-office is a big investment and the concept, though innovative, may not apply to everyone, especially if you are a newbie in the business world. For a new comer, the focus is on growth and tying down to one location is not a smart move, but for established businesses, owning a condo-office is a lucrative venture whose reward they can reap in future.