Buy versus Rent Decision of Office Space among Public Corporations in Ghana

Abstract

The primary focus of this study is to assess whether it is more beneficial for public corporations in Ghana to rent or buy office space for their operations.  Previous studies have only examined the factors that affect the decision to either rent or buy office space. The study was carried out through in-depth data mining of all the rented properties of one public corporation in Ghana over the period 2014 to 2019. Based on the information gathered, and drawing inspiration from the NPV investment appraisal technique, the present value of the cost of each of the options was analysed and compared to choose the best option. The paper found among other things that the company’s rented space from 2014 to 2019 grew by 68.5% and at the same time rental value increased by 450%. The present value analysis however reveals that it is more expensive to rent than to buy and this questions why decision makers of this public corporation still increased their rental space over the period. Using a public corporation from Ghana, this paper has extended the discussion on the lease versus buy decision by actually assessing the option that adds more value to the shareholders’ wealth instead of just examining the determinants of the lease versus buy decision. A study of this nature in the context of Ghana is notably non-existent.