Commercial Lease vs. Own Analysis
Run the real numbers before you decide — monthly costs, equity built, and 10-year net cost compared side by side for leasing, conventional financing, and SBA 504.
THE QUESTION EVERY BUSINESS OWNER ASKS
At some point, most established businesses in Portland face the same question: does it make more sense to keep leasing, or to buy the building? The answer is rarely obvious. Monthly payments on a purchase often look higher than a lease — until you account for equity, appreciation, and the fact that lease rates compound every year while a fixed-rate mortgage payment doesn't.
This tool is designed to cut through that confusion. Enter your assumptions — purchase price, current rent, financing terms — and the analysis shows you total cost over ten years for three scenarios side by side: continuing to lease, purchasing with conventional commercial financing, and purchasing with an SBA 504 loan. The numbers tell you where the crossover is and what you're actually building — or not building — with each option.
The decision also looks different depending on where Portland's market is in the cycle. In the current environment — with industrial vacancy tightening, asking rents compressing, and SBA 504 rates more competitive than conventional alternatives — the window to lock in favorable purchase terms on owner-user product is meaningfully better than it was two or three years ago. Businesses that delay the analysis until they're forced to make a decision by a lease expiration frequently find they've missed the best entry point. Running the numbers now, even if a purchase is 18 to 24 months away, gives you a clear picture of what you're working toward and what building size and price range pencils out at your current revenue and space requirements.
HOW THE ANALYSIS WORKS
The model compares three paths using the same property and the same ten-year window:
Leasing — your current monthly rent, escalated annually at the rate you specify, plus estimated NNN costs (property taxes, insurance, maintenance). What you pay out over ten years with nothing to show for it at the end.
Conventional Financing — typically 25% down on an owner/user commercial loan, 25-year amortization. Higher cash required at closing, fixed monthly payment, and equity building from day one.
SBA 504 — a government-backed program that allows qualified businesses to purchase owner-occupied commercial property with as little as 10% down. Lower entry cost than conventional, with competitive long-term fixed rates on the SBA portion.
The output shows monthly cost in year one, total cash out of pocket over ten years, estimated equity at year ten based on 3% annual appreciation, and effective net cost — what you actually spent after subtracting the equity you built.
ABOUT THE TOOL
The worksheet is built for owner-user commercial real estate in the Portland metro market. Default assumptions use realistic current inputs — 7% conventional rate, 6.5% SBA 504 rate, 25-year amortization, 3% annual appreciation, 3% annual rent escalation — all of which are adjustable. Enter your actual rent, the purchase price of the building you're evaluating, and your financing scenario, and the model recalculates the full ten-year comparison instantly.
This is the same analysis I run for clients before they make a buy vs. lease decision. If you want me to run it on a specific property or scenario, request a lease vs. own analysis below and I'll turn it around with current comp data and financing context for your situation.
WHAT THE NUMBERS TYPICALLY SHOW
For most Portland businesses evaluating a purchase in the $600,000–$2,000,000 range, the lease vs. own crossover — the point where ownership becomes economically superior to leasing — falls somewhere between years three and seven, depending on down payment, financing terms, and rent growth assumptions. SBA 504 accelerates that crossover by dramatically reducing the cash required at closing.
What the simple monthly payment comparison misses entirely is the wealth-building dimension. A tenant who leases for ten years at $3,200/month with 3% annual escalations pays over $440,000 in occupancy costs with zero equity at the end. A buyer who purchases the same building at $750,000 with SBA 504 financing pays a similar monthly amount but exits year ten with an estimated $350,000+ in equity — a six-figure swing in net economic position.
The analysis does not include tax benefits of ownership — depreciation and mortgage interest deductions — which would further favor buying for most businesses. Run those numbers with your CPA alongside this model.
WHEN LEASING STILL MAKES SENSE
Ownership isn't the right answer for every business. Leasing makes more sense when:
Your space requirement is likely to change significantly in the next three to five years — growth, contraction, or operational shifts that would require a different building
You need to preserve capital for business operations, inventory, equipment, or growth and cannot afford the down payment without constraining the business
The right building isn't available for purchase in your preferred location — in Portland's industrial market particularly, owner-user inventory is limited
Your business model requires flexibility that a long-term ownership position would constrain
You are in an early or uncertain stage of growth where locking into a specific location carries meaningful risk
The honest answer is that for businesses with stable space requirements, predictable operations, and access to a down payment, purchasing almost always wins on a ten-year horizon in Portland's market. The question is whether your situation fits that profile.
FREQUENTLY ASKED QUESTIONS
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SBA 504 is a government-backed financing program that allows owner-occupants to purchase commercial real estate with as little as 10% down. The structure splits the loan between a conventional bank (typically 50% of the purchase price) and a Certified Development Company backed by the SBA (40%), with the borrower contributing 10%. The SBA portion carries a long-term fixed rate that is typically below conventional market rates. The low down payment is the primary advantage — it preserves capital while allowing businesses to build equity in owner-occupied real estate.
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The SBA requires that the borrowing business occupy at least 51% of the building at the time of purchase. For new construction it's 60%. This makes SBA 504 specifically suited for businesses buying their own operating space — a contractor buying a warehouse, a healthcare operator buying a clinic building, a distributor buying industrial flex space. It is not available for investment purchases where the building will be leased to third parties.
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Portland commercial real estate appreciation varies significantly by property type and submarket. Industrial properties in the Airport Way, Columbia Corridor, and close-in submarkets have appreciated well above 3% annually over the past decade due to supply constraints and strong demand. Office and retail have been more variable. The 3% figure is a conservative assumption that most assets in functional Portland submarkets should meet or exceed over a ten-year horizon, but it is not a guarantee. Your CPA and lender should stress-test the model at 0% and 1% appreciation as well.
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No. Closing costs on a commercial purchase typically run 1–3% of the purchase price and should be added to the cash required at closing figure when comparing scenarios. On a $750,000 purchase, budget an additional $7,500–$22,500 in closing costs depending on financing type, title, and escrow. SBA 504 loans also carry an SBA guarantee fee and CDC fee that increase total closing costs versus conventional financing.
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Both. Running the model with your current rent and an estimated purchase price gives you a baseline read on whether ownership makes financial sense for your business before you spend time searching. Once you identify a specific property, run it again with the actual asking price, your best available financing terms, and current market lease rate comps for that submarket — the results will be more precise and give you a clearer go/no-go on that specific opportunity.
WHAT’S YOUR PROPERTY WORTH?
Whether you're evaluating a sale, considering a refinance, navigating a partnership change, or simply want a current read on what your commercial property is worth, a broker opinion of value gives you a clear, comp-based pricing range grounded in today's market. I'll deliver a report covering comparable sales, lease comps, vacancy context, and a value summary with conservative, probable, and optimistic conclusions — at no cost and no obligation.
ARE YOU PAYING THE RIGHT LEASE RATE?
If you're a tenant evaluating space, approaching a renewal, or comparing a lease against the cost of ownership, a lease rate analysis tells you whether the number on the table is at market, above market, or leaving money on the table before you negotiate. I run these analyses for tenants and owner-users across industrial, office, retail, and flex properties throughout the Portland metro.
WORK WITH MATT LYMAN
If you're evaluating whether to lease or purchase commercial space in Portland, I can run this analysis on any specific property or scenario you're considering — with current market lease comps, realistic financing assumptions, and context on what comparable buildings are trading for in that submarket.
I represent both tenants and owner-users across industrial, office, retail, and flex properties throughout the Portland metro. Whether you're exploring a purchase for the first time or comparing renewal economics against a specific building, reach out and I'll give you a clear picture of where the numbers land.