Corporate real estate – the decision to lease or buy

Track2Realty, Jones Lang LaSalle

Abhishek Kiran Gupta - Head of Research and Real Estate Intelligence Service at Jones Lang LaSalle

Faced with the prospect of new transactions, corporate real estate (CRE) managers have been analyzing the options of leasing versus buying a real estate space.

In the recent slowdown, distinct trends have emerged among industry verticals while strategically choosing either to lease or buy real estate space. While the IT/ITES sector has been the front runner in terms of lease transactions recorded during 2H08-1H10, accounting for 41% of the total lease transactions, BFSI and Manufacturing / Industrial sectors have been dominant purchasers of office space during the same period.

Pharmaceutical companies have a larger share of 8% in sale transactions, compared to only 2% in the recorded lease transactions. Telecommunication companies have equitable share in both sale and lease transactions, accounting for 7-8% of the total transactions recorded during the period.

The variation in the decision pertaining to lease or buy is not without reasoning. The underlying principle in the analysis is that the firms are generally focused on their core businesses and not in the properties they own or lease.

However, the degree of control of occupied space has far-reaching strategic implications for its occupiers. Hence, certain industries and corporate prefer either leasing or buying a real estate space.

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