The government designates non-profit businesses as 501c3’s, which means that they don’t pay real estate taxes on purchased property. If you’re a non-profit looking to lease office space, it might just be to your advantage to buy instead of rent. However, in New York City, buying office space isn’t just ridiculously expensive, it’s also difficult to find – 99% of the 350 million square feet of commercial real estate space in Manhattan is for lease, not for sale – which means that even if you do intend to buy, you might have trouble finding a place to do so. Smaller non-profits may consider purchasing a non-commercial space for their office, such as a townhouse. Wondering what’s best for your non-profit? Here’s what you should know.

• 501c3 businesses are only exempt from paying real estate taxes on purchased buildings. If you are a non-profit and you choose to lease, you will pay a portion of your building’s real estate taxes regardless of your tax designation.
• This being said, real estate taxes aren’t the end of the world. On average, real estate taxes in NYC are around $.35 per foot per year. Additionally, you don’t pay real estate taxes your first year/base year in your leased space. After the first year, you add about $.35 per foot per year, making the second year $.35 and the Third year $.70 and so on.
• Many non-profits like the idea of owning a building because it gives you the ability to control one of your largest fixed costs – this isn’t something you can do as easily in a leased space.
• Supporters of your non-profit may be excited by the idea of contributing to the purchase of an office space.
• Many non-profits have migrated to downtown Manhattan, as the real estate is much cheaper there than in Midtown. As non-profits want their donations to be going towards the cause, not towards an expensive office, downtown Manhattan suits not for profit businesses.
• The city of New York offers incentives to businesses who move downtown – so if purchasing a building is out of your non-profit’s budget, consider relocating to downtown Manhattan, where the costs are lower.