What are Office Condominiums?
Office condominiums work much like their private housing counterparts. Instead of renting a suite of offices, some companies purchase an individual unit in a complex. The common areas are co-owned by all of the tenants and a board usually oversees landscaping and other maintenance issues. Office condos are often created as part of a mixed-use renovation in downtown areas of medium to smaller cities.
There are some advantages and disadvantages to office condominiums. One plus is increased ownership rights compared to renting or leasing equivalent space. Rental properties are always under the control of a landlord, which means that monthly rent could be raised or the lease terminated with short notice to the tenant. By owning the space, companies in condiminiums can avoid such surprises. The monthly mortgage should remain relatively stable over the life of the loan.
Office condominiums are ideal for professionals and companies that can safely predict their permanent space needs. An architectural firm or small advertising agency might do well in such a setting, but a fledgling manufacturing company could find future expansion nearly impossible. There may also be restrictions on the type of business which may be conducted in units. The facilities may not be able to accommodate excessive customer parking, for example.
One plus for those leasing office condominiums is the benefit of mixed-use buildings. It is not unusual for restaurants, specialty stores and other consumer outlets to share space with condos. This means that employees of these offices don't have to travel far for entertainment and food. Mixed-use buildings tend to be located in downtown areas or other high-traffic business centers.
During economic downturns, larger companies may invest in office condominiums in order to consolidate departments. Smaller companies may not see the benefits of condo ownership if their current rental or leasing arrangements appear beneficial. Units are often constructed on the 'If we build it, they will come' business model.
Regarding the stability of mortgage payments over that of standard yearly rent increases...there are a number of new commercial mortgage programs designed specifically for office condos, including a 20, 25, and even 30 year fixed rates. One company offers fully amortizing 30 year fixed rate commercial mortgages. I recently purchased a warehouse condo with only 10% down and am now paying a fixed rate for the next 30 years. What peace of mind!
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