Introduction: The Lease vs. Buy Decision in Today’s Market
Deciding whether to lease or buy commercial real estate is a pivotal choice for any business, with long-term implications for financial stability and operational agility. In 2025, the Des Moines commercial and industrial real estate market presents unique opportunities and challenges shaped by a decade of rapid appreciation, a recent correction, and a new phase of equilibrium. This article explores the pros and cons of leasing versus buying, using current market data and actionable insights to help you make the best decision for your business.
Des Moines Market Snapshot: 2014–2025
- 2014–2021: Industrial real estate values in Des Moines nearly doubled, fueled by e-commerce growth, supply chain shifts, and a robust residential market.
- 2021–2024: Over 6.8 million square feet of new industrial space was delivered, increasing inventory by more than 10% and temporarily outpacing demand.
- 2022–2025: Rising interest rates and moderating demand triggered a market correction. By Q3 2025, the market reached a new equilibrium, with stabilized prices, rents, and a balanced supply-demand dynamic.
- Vacancy Rate: The market’s vacancy rate hovered between 5.7% and 5.9% through 2025, ending Q3 at 5.7%—a sign of healthy balance and opportunity for tenants.
Why Leasing Makes Sense in 2025
1. Preserve Capital for Core Business Growth
Leasing allows you to avoid large upfront capital expenditures, such as down payments and closing costs. This keeps your cash and credit lines available for inventory, technology, hiring, or other strategic investments—rather than tying up resources in real estate.
2. Maximize Tax Benefits
Lease payments are typically fully deductible as a business expense, potentially reducing your taxable income and improving your bottom line compared to the depreciation and interest deductions associated with ownership.
3. Increase Business Flexibility
Leasing provides the ability to scale operations up or down as your business evolves. At the end of a lease term, you can relocate to a space that better fits your current needs, budget, or strategic goals—without the complexities of selling a property.
4. Minimize Risk and Operational Burden
Leasing shifts many property-related risks and responsibilities—such as maintenance, repairs, and market fluctuations—to the landlord. This allows you to focus on your core business, rather than property management.
5. Improve Adaptability in a Dynamic Market
With the Des Moines market stabilizing and vacancy rates at 5.7%, tenants have more negotiating power and flexibility to secure favorable lease terms, especially as new construction slows and landlords seek to fill available space.
When Buying May Be the Right Choice
While leasing offers significant advantages, buying commercial property can be the right choice for businesses with stable, long-term space needs and the capital to invest. Ownership provides:
- Equity Building: Over time, property ownership can build equity and offer potential appreciation.
- Control: Owners have full control over the property, including customization and long-term planning.
- Fixed Costs: Mortgage payments can provide cost predictability, especially in a rising rent environment.
However, in the current Des Moines market, rising interest rates since 2022 have increased the cost of borrowing, making leasing a more attractive option for many businesses.
Decision-Making Framework: Lease vs. Buy in 2025
| Factor | Leasing Advantage | Buying Advantage |
| Upfront Capital | Minimal (preserves cash) | Significant (down payment, closing) |
| Flexibility | High (easy to scale/relocate) | Low (long-term commitment) |
| Tax Benefits | Lease payments deductible | Depreciation/interest deductions |
| Market Risk | Landlord bears risk | Owner bears risk |
| Maintenance/Repairs | Landlord responsibility | Owner responsibility |
| Long-Term Cost | May increase with rent escalations | Potential equity/appreciation |
| Customization | Limited | Full control |
| Practical Steps: |
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- Assess Your Business Timeline: If your space needs may change in the next 3–5 years, leasing offers greater flexibility.
- Evaluate Capital Availability: If preserving cash is a priority, leasing is advantageous.
- Analyze Market Conditions: With stabilized vacancy rates and a slowing construction pipeline, leasing terms may be more favorable in 2025.
- Consider Interest Rates: Higher borrowing costs since 2022 make leasing more cost-effective for many businesses.
2025 Market Insights: Why Leasing is a Smart Move
- Market Stability: The Des Moines industrial and commercial real estate market is balanced, with a 5.7% vacancy rate and strong leasing activity, providing tenants with options and negotiating leverage.
- Reduced Construction Pipeline: With only 106,800 square feet under construction in Q3 2025, supply is tightening, which may support future rent growth and make now an opportune time to secure a lease.
- Rising Interest Rates: Since 2022, higher interest rates have increased the cost of buying, making leasing a more attractive and flexible option for many businesses.
- Submarket Opportunities: High-demand areas like Ankeny (1.4% vacancy) offer limited availability, while other submarkets provide value opportunities for tenants seeking space.
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Conclusion: Make the Right Move for Your Business
In 2025, the Des Moines commercial real estate market offers a stable, opportunity-rich environment for businesses evaluating whether to lease or buy. Leasing provides enhanced flexibility, capital preservation, and risk mitigation—key advantages in a market shaped by recent growth, correction, and stabilization. By understanding current trends, vacancy rates, and the impact of rising interest rates, you can make a strategic decision that supports your business’s long-term success.
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