Investing in office property

Figment

Just idly thinking about this at the moment.
I am in need of an office this year to fit the expanding business.
Its an expansive prospect though. You are talking about the equivalent of an extra salary. A salary that is not earning in return. Dead money.

But I have been thinking about other options and I am looking for feedback on an idea.
We could partner up with a few other companies who are looking for office space and actually buy a property to use as dedicated office space with shared facilities.
That way the money for office space actually becomes an investment that might develop into something like this http://www.fitzbiz.com/ when each business grows too big for the space and moves out.
There would of course have to be a solid contract in place for all parties covering all eventualities.


What do you think? Any obvious roadblocks for the idea?

lomb

how do u mean its dead money? is that rent u are refering too? the office market is saturated at the moment with loads of supply and no demand especially rental wise.
great time to rent imho. expect to pay no more than 10-12 euro a sq foot, not alot really. prob not worth trying to run a property company, stick to the business u know best. the one thing about offices is u can always move if ur lease runs out or the rent/service charges rise or if u need more/less space. also flexible leases are available unlike where shops just dont have the luxury of this, hence shops should always try to buy when there is an option, but in my opinion offices are neutral re buying or renting. many people buy them for their business in a personal pension fund of some kind(a 20 year mortgage is available this way) and rent it back to the business. this is a good pension fund and a good way of saving.

Figment

It is the rent i am refering to.

lomb

well rents are collapsing out there for office properties down to 10-12 euros in areas like parkwest etc. centerpoint was a good buy @230000 but the small units are all sold and now the developers bymac want 425000 for the same sq footage in dundrum.
there is no such thing as prime office property anymore(with companies moving from d2, d4 into suburban semi industrial schemes with parking), the way there is prime retail(footfall), or prime residental(well serviced, schools, peaceful area, place people want to live,close to work)
renting office property today is a nightmare (was talking to an agent and he has a 4000 sq foot propert on harcourt st thats been on the market for a year-once considered absolute prime-landlord is getting desperate now)but the flipside of this is u can negotiage a great lease with break options every year almost unheard of 3-5 years ago. do u really want to buy a property under 15 year mortgage( the only commercial mortgage available to business) and watch the capital payments cripple your business? buying under a personal pension fund is fine, but what if u need more space?

what i cant understand is why offices are selling at 4% yield , but these tend to be rent to great tenants on secure long term leases without break options hence pension companies buy them. however individual landlords know the chance of furthur appreciation is very very low with the massive oversupply, and once the lease finishes the building may be 'worthless' hence they are selling..

have u seen the hugh office complex in citywest that been vacant and to rent for the last 3 years, enough said..

RainyDay

Have a chat with your accountant or advisor. Many business owners are buying the property personally and then letting the property to their business. This is generally the most tax-effective method of proceeding.