However, for traditional space occupiers, the office condo is much more than just another occupancy alternative—it's a strategic, long-term business opportunity. A well-located, well-timed condo play remains a solid investment for an entrepreneur, even in overbuilt markets.For a select group of businesses, ownership of office space delivers the optimum facilities solution and yields financial benefits not achieved through leasing.

The following key considerations should be reviewed by anyone wanting a better understanding of this alternative to the traditional office lease:

The Converter: The converter is the ownership group that either converts a traditional leased building or develops a new project as an office condo. It is abundantly clear that the success of a project from a buyer's perspective is firmly grounded on who the converter is and the experience that they posses in all facets of the office condo continuum. If the converter does not buy the building correctly and apply the appropriate pricing fundamentals, the project will be challenged.

The Buyer: Office condo ownership is not for large public corporations or businesses that do not have a firm handle on their growth expectations. Office condos are best suited for companies that are for the most part stable in their space requirements. It is appropriate to dispel a myth about the perception of the space flexibility inherent with an office condo. If a business firmly believes in its growth expectations, and the converter apportioned the unit sizing correctly, the buyer can purchase smaller incremental units and successfully offset the costs via third party leasing.

Pricing Fundamentals: For the pricing fundamentals to work in favor of the office condo buyer and converter, it is necessary for the converter to purchase the building at an appropriate price (below retail pricing) that allows for a return on their investment while at the same time pricing the asset in alignment with the after-tax-cost of leasing. This is where some of the converters missed the boat, for they did not perform this due diligence up front. They simply purchased a building and embedded a desirable profit without any consideration for market fundamentals.

Financial Considerations: The three most significant benefits to owning office space are long-term cost containment, wealth accumulation (equity buildup) and initial up-front capital costs.

In leases, the rental rates are increased yearly based upon a negotiated amount. Lease renewals are subject to adjustment based on market pricing. Historically over the last several years, rents have increased across all submarkets.

In ownership, the buyer has an option to lock down long-term facilities costs based on a fixed-rate mortgage. This uniquely provides for fixing and containing expenses so that the business owner can plan and not succumb to dreaded surprises.

From an equity buildup perspective, by virtue of paying down debt service every month, office condo owners increase their net worth. Also, if an owner requires capital for business acquisition or expansion, equity in the asset can be used to fund such an initiative. Try asking your landlord for some of your money back!

Oftentimes, especially considering the SBA 504 program, the amount of equity required to buy an office condo is actually the same or less than the capital required to outfit an office space beyond the tenant-improvement allowance.

Interest Rate Considerations: Given today's interest rate environment, there could not be a better time to consider owning an office. Rate compression over the last couple of months has reduced ownership costs, while leasing costs have remained flat or increased slightly in most South Florida submarkets.

The views expressed here are those of the author and not of Real Estate Media or its publications.

Alan Kleber is a senior director at Cushman & Wakefield of Florida, where he leads the firm's corporate advisory practice specializing in office tenant representation. He can be reached at [email protected]