Many people who call us are quite uncertain of how long they need the space they seek. In fact, after 20 years in the modular building business, I believe I speak to more people who are uncertain about their time frame than anyone else. Most often, these folks are uncertain about other aspects of the space too, such as how it may be utilized and by whom. I have a lot of empathy for these callers because I believe they are caught in the middle of two simple procurement activities – buying or leasing.
Comparing Buying and Leasing:
The act of buying a permanent modular building is a relatively easy decision. Modular construction compares well to stick-built on cost, quality, and price. Permanent building shoppers usually have their design ideas well ironed out and they tend to know exactly what they want. I always wonder why more people don’t choose to build permanent buildings with modular construction. Prefabricated construction only holds 3-5% of all construction starts. On the leasing side, people who are certain of short-term use also know what they value and make easy judgments by comparing quotations. However, for those who are uncertain of their time frame, the determination of buying versus leasing can depend on several factors.
I‘m eager to elaborate on what I‘ve learned over the years, but I do want to first qualify that I am not an accountant or financial expert. The financial folks should be primarily consulted when making your decision. I’ve been telling our clients that the “cut-off” for leases is somewhere between four and six years. The overall design quality is also a determining factor when making your decision.
Good common sense and business acumen are as important factors as any, and here’s why: The modular systems we purchase to hold “on specification” vary greatly in cost and quality. Our most basic specification, “ProSpace“ systems, are code compliant at the date of purchase, but have low frills. When using in-fleet or standard system layouts (e.g., a wide-open floor plan), you will pay a lower lease rate.
Many of our clients find four and five-year leases most affordable when they use basic specs and do not customize. Many of our clients place a huge value on being able to return a building. Committing to a permanently affixed building can be risky due to uncertain life, so they mitigate risk by leasing. However, when clients use our buildings longer term, say over 18 months, their use typically requires custom floor plans, and systems unique to their needs. Many seek upgrades related to mimicking a permanent space.
Our Solution:
For these situations, we designed our Silverline Building System. It has features and upgrades more akin to permanent space, yet it can be leased. Is this system the best of both worlds? Well, it certainly satisfies many of the considerations for permanent space, but with the flexibility of being returned to Triumph. We have been able to create high value in leasing Silverline, but when investments are made into imitating permanent space, leasing costs will go up. Due to rising cost expenditures, clients’ appetite for “renting” long-term does tend to dissipate. We have many clients that opt to purchase this flexible building system when they know they will use it for more than 60 months.
Other factors in the Buy or Lease “calculus” to consider:
1. Triumph offers our customers the ability to purchase our buildings, but then have us store them. We also offer the option of having us purchase the buildings back under favorable contract terms. Our goal is to offer maximum flexibility.
2. We partner with interior wall system provider DIRTT (“Do It Right The First Time”), providing ease and relative affordability of changing the interior configuration over and over again.
The overall quality, advanced technology, and modern design characteristics of our movable wall system increase longer-term value. Designing with Triumph a building with DIRTT interior space may lend itself to a sale from the outset of the design and planning process. In my mind, it may be the highest value to any client who is caught in the middle of lease versus own.
In closing, the question “lease versus buy” would seem straightforward, but it is not. It can be quite a quandary — not only for our clients but for us as well. Both parties are caught in between two clear value propositions. In the end, each client’s needs are distinct, and people value different things. For now, we are happy to “meet you in the middle” and we will figure it out together!
