At a glance:
- Leasing suits startups with limited capital, flexible growth needs, or evolving business models.
- Buying suits businesses with stable finances and a long-term plan to build equity.
- Leasing offers agility and tax-deductible rent; buying provides fit-out freedom and potential asset growth.
- Your stage of growth, cash flow, and operational needs should drive the decision.
Deciding whether to lease or buy commercial property is one of the biggest decisions a startup founder will make. The workspace you commit to can shape how your business operates, grows, and presents itself to clients and investors.
Startups often face unique challenges: limited upfront capital, unpredictable cash flow, and the need to stay agile as business models evolve. Leasing may offer flexibility to scale or pivot quickly, while buying delivers stability, control, and a long-term asset on the balance sheet.
There’s no one-size-fits-all answer for whether startups should lease or buy. Your current position and future goals must guide the choice.
This guide explores the key factors to consider when weighing up whether to lease or buy commercial property in Melbourne’s dynamic market.
Understanding Your Business Cash Flow
One of the first factors you should asses when choosing whether to lease or buy commercial property is your business stage and cash flow.
If you are considering leasing, you typically face lower upfront costs. This is ideal for cash-conscious start-ups that do not yet have a fixed and steady revenue stream. There’s no need for a large deposit or commercial property loan, which allows startups to preserve working capital for staffing, marketing, or product development.
On the other hand, buying commercial property ties up a significant portion of capital in the short term, but it can help build long-term equity and asset value for your business.
For example, a creative startup agency might lease a compact office in a co-working space. This enables the agency to funnel its budget into portfolio development and client acquisition instead of locking capital into property ownership. In contrast, a legal tech startup with secured venture capital might choose to buy a commercial office suite to provide asset security and signal stability to investors and clients.
Projecting Growth and Scalability
Another major factor to consider when deciding whether to buy or lease a commercial property is your projected growth and scalability.
If you’re expecting rapid team expansion, changes in operations, or entry into new markets, leasing gives you the agility to relocate or upsize with fewer complications.
Conversely, if your growth trajectory is steady and you envision establishing a permanent base, such as a company headquarters, buying may offer greater stability and control.
For example, a fast-growing digital marketing firm may begin with a small leased office but plan to double its headcount within a year. Leasing allows them to scale quickly without the constraints of property ownership. In contrast, an architecture studio with long-term contracts and a stable team might choose to purchase a studio space, providing a permanent base of operations and a valuable business asset.
Evaluating Operational Control & Customisation
The level of operational control and customisation your business requires also influences whether you should buy or lease.
Buying offers maximum flexibility when it comes to redesigning and renovating a space to suit your business needs.
That said, leasing may involve restrictions depending on the terms of your lease agreement. You may need landlord approval for even minor alterations. Making unauthorised changes can result in a breach of lease terms, potentially leading to legal or financial penalties.
For example, a wellness clinic might buy its space to design purpose-built therapy rooms, install plumbing for hydrotherapy equipment, and create a fully branded client experience without landlord constraints.
Meanwhile, a financial advisory startup may be better suited to leasing an open-plan office with shared amenities. Since its operations only require desks, meeting rooms, and internet access, it doesn’t need extensive fit-out control or structural changes.
Read more: Redesigning or Renovating Your Commercial Property: Things You Should Know
Tax & Financial Implications
The financial structure of leasing versus buying can have significant tax consequences.
Leasing allows you to deduct rent as an operating expense. It also typically involves lower maintenance costs and fewer long-term liabilities.
In contrast, buying offers potential tax benefits through building depreciation but also introduces additional financial responsibilities, such as land tax, council rates, property management, and maintenance.
According to the Australian Taxation Office (ATO), businesses that lease commercial premises can claim rent as a deductible operating expense. For property owners, there are also provisions to claim tax deductions for the depreciation of the building and eligible capital expenditures.
For example, an ad agency might choose to lease a modern office suite. Their income fluctuates based on client campaigns, so leasing helps manage predictable monthly expenses while allowing them to reinvest profits into team growth and client services without worrying about maintenance costs or property taxes.
Similarly, a specialist dental practice might opt to buy a converted commercial terrace. The building qualifies for depreciation, while the land and property value are expected to grow. In addition, owning the space helps reduce long-term rental costs while building an asset on the business’s balance sheet.
Exit Strategy and Risk Tolerance
You also need to account for your exit strategy and risk tolerance when considering whether to lease or buy a commercial property. Your ability to pivot and how much financial risk you’re willing to accept should influence the decision.
Leasing is ideal for startups that may change business models, relocate frequently, or operate in industries with fast-moving market demands.
That said, buying is suited to startups with a long-term footprint, confidence in location choice, and the financial resilience to manage resale complexity or extended holding periods.
Choosing whether to lease or buy commercial property is a strategic decision that can shape your startup’s future. The right choice should align with your business stage, cash flow, growth plans, and operational needs.
If your business values flexibility, lower upfront costs, and the ability to pivot easily, leasing may be a better option. If you’re seeking long-term stability, control over your space, and the opportunity to build equity, buying could be a smart investment.
Ready to make the right move? At Axis Property, we specialise in helping startups and growing businesses like yours find commercial spaces that align with your current needs and future ambitions. Contact us today to discuss your leasing or buying options.