Office Lease vs Buy Calculator: Run the Numbers

For a 2,500 SF Class B office in San Francisco over 10 years, median total occupancy cost is roughly $2.41M lease vs $1.94M buy with 80% LTV financing per CBRE Lease vs Own framework. Once opportunity cost on the down payment is factored in, lease often wins back. Buy makes sense when you plan to occupy 10+ years, can put 25 to 30% down, and accept capital expenditure responsibility.

TL;DR

Lease vs buy is a 10-year TCO question with three big drivers: cost of capital (lease has none, buy has cost of debt + opportunity cost on equity), capital expenditure responsibility (lease has none beyond TI, buy has roof, HVAC, parking lot, structural), and exit liquidity (lease ends with no equity value, buy ends with sale proceeds or a refinance). Per SBA’s 504 program data, owner-occupants can use SBA 504 financing with 10% down, which can flip the math toward buy for small businesses that would otherwise have to lease.

The 10-year TCO comparison

A 2,500 SF Class B office in a major US metro, $300/SF acquisition cost ($750K total), 25% down, 75% conventional commercial mortgage at 7.5% over 25-year amortization:

Lease scenario (10 years at $50/SF, 3% escalation, NNN $12/SF, CAM $5/SF):

• Total base rent over 10 years: $1,432,000
• Total NNN over 10 years: $300,000
• Total CAM over 10 years: $125,000
• Less TI allowance (year 1): -$200,000
• Less free rent (4 months): -$42,000
• Plus broker commission (in deal economics): $86,000
• Plus security deposit (3 months, refundable but parked): $32,500 net opportunity cost
• Total 10-year occupancy cost (lease): $1,733,500

Buy scenario (75% LTV, 7.5%, 25-year amortization):

• Down payment: $187,500 (capital outlay; opportunity cost over 10 years)
• Monthly mortgage payment: $4,159 × 120 months = $499,000
• Property tax (10 years at $12/SF, 3% escalation): $343,000
• Insurance, maintenance, utilities (10 years): $250,000
• Capital expenditures (HVAC year 7, parking resurface year 5): $80,000
• Plus opportunity cost on $187,500 at 7% (10 years): $181,000 forgone
• Total 10-year cost (buy, gross): $1,353,000
• Less terminal value at year 10 (assuming 3% appreciation): -$757,000 (sale proceeds)
• Plus mortgage principal remaining at year 10: $440,000 (paid off via sale)
• Total 10-year net cost (buy): $1,036,000

In this hypothetical, buy is ~$700K cheaper over 10 years. Critical caveats: depends entirely on appreciation assumption (3% used here is moderate; flat or negative kills the math), cost of capital, and operating expense assumptions. For specific deal modeling, hire a CPA and tenant-rep broker.

Source: math is illustrative; actual deal numbers vary widely. See CBRE’s Lease vs Own analysis framework for the full methodology.

When buy makes sense

Six conditions that favor buying:

1. You plan to occupy 10+ years. Below 10 years, transaction costs (closing fees, broker, attorney, environmental review) eat the savings.
2. You can put 25 to 30% down conventionally (or 10% via SBA 504).
3. Your business cash flow is stable. Owning means committed monthly debt service; you can’t sublet your way out of a downturn.
4. You’re willing to be the building operator. Roof leaks, HVAC failures, parking lot resurfacing, all your bill.
5. The local market shows appreciation potential. In structurally declining markets (Detroit, Cleveland, parts of Chicago), buy economics are dicey because terminal value is uncertain.
6. You have specialty space needs. Restaurants, manufacturing, life science, owning lets you control buildout decisions over decades that landlords might constrain.

When lease makes sense

Six conditions that favor leasing:

1. You plan to occupy under 7 years. Transaction cost amortization argues for lease.
2. Your business is growing fast. You need flexibility to expand or contract; ownership locks you in.
3. You don’t want to be a building operator. Your time is better spent running your business.
4. Your cost of capital is high. The opportunity cost of the down payment matters most when capital is expensive.
5. You’re in a soft market with rich concessions. Free rent + TI + flat rent through year 5 can dominate buy economics in markets like SF, Portland, downtown Seattle in Q1 2026.
6. You want to preserve borrowing capacity. A real estate purchase reduces your business-credit borrowing capacity; if you need debt for inventory, working capital, or hiring, leasing preserves it.

SBA 504 financing for owner-occupants

The SBA 504 program lets owner-occupants buy commercial real estate with 10% down (vs 25 to 30% conventional). Structure per SBA 504 program documentation:

• 50% conventional first mortgage from a bank
• 40% SBA 504 second mortgage (debenture)
• 10% borrower equity

The SBA 504 carries below-market interest on the second mortgage, making total cost of capital lower than 100% conventional financing. Eligibility:

• Business must occupy 51%+ of the building
• For-profit business
• Net worth under $20M, average net income under $6.5M (after-tax)
• Specific use restrictions

For small businesses where the down-payment hurdle is the binding constraint, SBA 504 can flip the math toward owning.

The capital expenditure trap

The single biggest “owning” cost most lessees underestimate is capital expenditure on aging buildings. A 30-year-old building averages 3 to 5% of value annually in deferred capex over its remaining life per BOMA Capital Expenditure Benchmarks:

• HVAC system replacement (typical useful life 20 to 25 years): $200,000+ on a 20,000 SF building
• Roof replacement (typical useful life 25 to 30 years): $80,000 to $200,000
• Parking lot resurface (typical useful life 15 to 20 years): $30,000 to $80,000
• Façade and structural (40+ year cycle): $100,000+

Lessee tenants pay none of these directly. Owner-occupants pay all of these as they come due. Always reserve 2 to 4% of building value annually for capex if you own.

How to model your specific deal

Use our pillar TCO calculator to model the lease-side. For the buy-side, model:

1. Down payment + closing costs (typically 3 to 5% of purchase price)
2. Monthly mortgage payment (P&I) at the rate you can secure
3. Property tax and insurance (annual, with escalation)
4. Annual operating costs (maintenance, utilities, capex reserve at 2 to 4%)
5. Terminal value at sale (with conservative appreciation assumption)
6. Opportunity cost on your equity (typically 7 to 10% over a 10-year hold)

Compare 10-year TCO net of terminal value (buy) vs 10-year TCO (lease). Decision rule: if buy is 15%+ cheaper TCO and you meet all six “buy makes sense” conditions, buy. Otherwise lease.

Frequently asked questions

When does buying make sense?

When you plan to occupy 10+ years, can put 25 to 30% down, your business cash flow is stable, and you accept the operating-cost responsibility (HVAC replacement, roof, parking lot). Below 7 years occupancy or above 25% growth assumptions, lease usually wins.

What’s the biggest hidden cost of owning?

Capital expenditures. A 30-year-old building averages 3 to 5% of value annually in deferred capex over its remaining life. A new HVAC system on a 20,000 SF building can run $200K+. Always reserve 2 to 4% of building value annually for capex.

How does SBA 504 financing change the math?

SBA 504 lets owner-occupants put 10% down on commercial real estate (vs 25 to 30% conventional). It can make ownership viable for small businesses that would otherwise have to lease. Eligibility requires 51%+ owner occupancy, for-profit status, and specific net-worth/income limits.

Is lease vs buy a 10-year decision?

Generally yes. Below 7 years occupancy, transaction costs (closing, broker, attorney) eat the buy savings. Above 10 years, the lease-vs-buy spread is typically large enough to be decision-determinative.

What’s the opportunity cost of ownership equity?

Typically 7 to 10% annually, the rate you’d earn on the equivalent capital deployed elsewhere in your business or in low-risk investments. On a $200K down payment over 10 years, opportunity cost is roughly $200K cumulative at 8%. Material to the comparison.

Can I sublease space I own?

Yes, but it’s a different operating model than owning for occupancy. You become a landlord with all the operational complexity. Most owner-occupants who try this discover the time cost is higher than expected.

Does owning let me deduct the building?

You depreciate the building (not the land) over 39 years for commercial property under IRS Publication 946 MACRS rules. This is a meaningful tax benefit but is recaptured on sale. Consult your CPA on the depreciation math.

What’s a build-to-suit alternative to lease vs buy?

Build-to-suit is a long-term lease (typically 15 to 20 years) where the landlord builds the property to your specs. Economically similar to owning for occupancy but with no equity. Common in industrial and single-tenant retail.

Related guides

• Pillar: all-in commercial lease cost calculator
• Commercial lease types: NNN vs Gross vs Modified Gross
• Commercial lease total cost of occupancy

Sources

1. CBRE Lease vs Own Framework accessed 2026-05-02
2. SBA 504 Loan Program accessed 2026-05-02
3. BOMA Experience Exchange Report accessed 2026-05-02
4. IRS Publication 946 MACRS Depreciation accessed 2026-05-02

Not financial or legal advice. Estimates based on publicly available market data and broker reports. Commercial real-estate is highly local and deal-specific. Consult a licensed commercial real-estate broker, CPA, and real-estate attorney before signing any lease or making a purchase decision.