To maximize the return on a commercial property, owners must be able to attract renters that will enter into long-term lease agreements, maintain the building, and pay higher rent.
Owning commercial real estate can be an excellent investment, but real estate is a competitive market. No matter the appeal of the building as a whole, other structures may offer more amenities or newer features that drive down rents of different locations.
To maximize the return on a commercial property, owners must be able to attract renters that will enter into long-term lease agreements, maintain the building, and pay higher rent. You may also consider getting full-service property managers. There are many things a building manager or owner can do to improve marketability and appeal to a better class of lessors.
1. Increase the rent
The easiest way to increase the cash flow is to increase the rent. Before broaching this topic with current renters, do the research. Buttonwood commercial property management advises, “Hire a commercial real estate agent or commercial property manager to compare the building to others of similar size and condition in the area. It’s essential to know the fair market value before considering a rent hike. Rents too high will price the building out of the market and may motivate current tenants to find less-expensive locations.”
2. Improve and renovate
Many improvements can be made to any commercial property to make it more appealing to current renters or attract new renters. When considering a rent hike, start the conversation off on the right foot by first tending to as many inexpensive renovations as possible. Even small changes will increase the building’s appeal and demand.
Painting walls, updating wall outlets and switches, adding landscaping, and replacing interior doors, are all topical improvements that can make an older building look new and improve its curb appeal
Bring in a contractor to review structural needs. Determine if the property is in need of a commercial restroom renovation as well. While these may be more expensive, they are more likely to result in the ability to charge higher rent.
Consider improvements such as adding an elevator to make it more accessible or upgrading the lift if one already exists.
3. Reduce expenses
Gather documents concerning the building and review these or have them reviewed by a professional to look for ways of reducing costs. With new technology such as improvements in insulation and utilities, there are many ways to reduce maintenance or ongoing expenses. It might be as simple as a switch to LED lighting or replacing filters or aging heating and cooling systems.
4. Repurpose the building
Take a close look at the building and evaluate whether it could be reconfigured into a different type of space to add appeal. If it has been a small market, what would it take to make it function as a coffee shop or bookstore? If it’s been industrial space, can it be renovated as modern, open floor plan lofts or large, live-in artist studios?
5. Improve marketing
Give the marketing plan a thorough review. What has been done in the past to showcase the building to the right type of audience? If a for rent sign in the front window is the extent of the effort, consider setting aside money to launch a comprehensive marketing plan. New marketing efforts could include social media, a direct mail to local agents, or even a block party so locals can come in and see for themselves how versatile the space is.
If the building is vacant or partially vacant, bring in a staging company to dress the space. People are better able to imagine how they can use a room if they have visual clues with which to work.
6. Make it green
The desire to be a part of sustainability is growing. No longer are people satisfied to just recycle bottles and reuse plastic bags. Sustainability extends from the person to the workplace, and renters are seeking real estate in line with their desires to go green.
Older buildings especially are at a disadvantage, and the investment to improve them will be greater. Achieve increased efficiency by replacing or adding to insulation, installing solar PV panels, converting to renewable heating or low-flow water systems, or adding energy-efficient lighting throughout. Not only will the building become more attractive to renters, but owners might also receive tax advantages.
Keep it clean and rented
Vacant space is most appealing when it is clean, and colours are neutral. It is easier for a potential renter to imagine the space as their own if the owner’s or previous tenant’s items do not clutter the room.
With a limited budget, owners can make visual improvements to a building that enhances its appeal. With a more attractive, modern space, owners may be able to raise rents for current tenants, change the building’s purpose, or attract new, higher-paying tenants.