As a commercial property owner, one of your primary goals is to maximize your return on investment (ROI). Whether you’re managing office spaces, retail buildings, or industrial facilities, improving your ROI requires strategic planning and execution. It’s not just about increasing income – it’s also about minimizing expenses and enhancing the overall value of your property.
9 Ways to Increase Your ROI
Every commercial building is different – and each property use, property owner, and financial statement is unique. So, while it’s impossible to make a blanket statement about guaranteed ways to increase your ROI, there are some tactics and actionable steps that tend to produce positive results when correctly implemented.
We’re going to look at nine of those in this article to give you a feel for where you can improve.
- Focus on Attracting High-Quality Tenants
The quality of your tenants can make or break your ROI. High-quality tenants not only pay rent on time but also take care of your property and often renew their leases, reducing turnover costs.
To attract these tenants, focus on creating a property that stands out. Ensure the building is well-maintained, clean, and equipped with modern amenities. Professional property management can also make a difference, providing tenants with reliable support and fostering positive relationships.
Additionally, screen tenants thoroughly. Check their credit history, business stability, and references to ensure they’re a good fit for your property.
- Hire a Property Management Company
If you own a commercial building of any size, you’d be wise to hire a property management company to oversee it. This not only helps with the time-consuming and painstaking day-to-day responsibilities, but also with big-picture issues.
A good commercial property management company is going to fight for your bottom line. Los Angeles Property Management Group comes to mind. They recently saved a new client $5,000 within the first week of switching to them. They did so by getting them out of a roof replacement agreement that was going to overcharge them. Then there was another client who they were able to get an $11,000 check from the City of Santa Monica by disputing what was an excessive water bill.
As you can see, property management companies – at the least the good ones – are doing more than just collecting rent checks and making sure your lease agreements are properly filed away. They’re actually looking for ways to help you lower expenses and increase income.
- Invest in Energy-Efficient Upgrades
Energy efficiency is more than just an eco-friendly trend—it’s a way to cut operating costs and increase tenant satisfaction. Installing energy-efficient lighting, HVAC systems, and insulation can lower utility bills and make your property more appealing to tenants.
You might also consider adding solar panels or smart building technologies, like automated lighting and temperature controls. These upgrades can often be written off as tax deductions or qualify for government incentives, further boosting your ROI.
- Optimize Space Utilization
Unused or underutilized spaces represent missed opportunities for income. We recommend looking for ways to maximize the usable space in your property.
For instance, you could convert an empty storage area into rentable office space, a meeting room, or even a co-working area. In retail spaces, smaller units could be leased to pop-up shops or seasonal vendors, creating an additional revenue stream.
- Regularly Review and Adjust Lease Terms
Your lease terms play a significant role in your overall ROI. To ensure you’re maximizing revenue, periodically review your lease agreements and adjust them as needed.
For example, include clauses that allow for annual rent increases tied to inflation or market rates. Offering longer lease terms with renewal incentives can also provide stability while ensuring you keep up with market trends.
Customizing lease terms based on tenant needs – such as offering build-out allowances for office customization – can help you attract and retain tenants while increasing overall value.
- Reduce Maintenance and Operating Costs
Keeping maintenance and operating costs under control is critical for maximizing ROI. Start by conducting a cost analysis to identify where you might be overspending.
One effective strategy is preventative maintenance. Regularly inspecting and servicing key systems like plumbing, HVAC, and electrical can help you catch small issues before they become expensive repairs.
Additionally, evaluate your vendor contracts and shop around for better deals on services like landscaping, cleaning, and security. Small savings across multiple areas can add up over time.
- Have a Property Marketing Strategy
Even the best commercial properties need effective marketing to attract the right tenants. Make sure your marketing efforts highlight the unique features and advantages of your property.
Use professional photography and virtual tours to showcase your space online. Leverage commercial real estate platforms and social media to reach a broader audience. Networking with local businesses and attending industry events can also help you connect with potential tenants.
- Build Strong Tenant Relationships
Happy tenants are more likely to renew their leases and recommend your property to others. Building strong relationships with your tenants can significantly reduce turnover and associated costs.
Be proactive in addressing tenant concerns and maintaining open lines of communication. Regularly check in with tenants to ensure they’re satisfied with the property and their experience.
Offering perks like tenant appreciation events, small upgrades, or flexible lease renewal options can go a long way in fostering loyalty and minimizing vacancies.
- Keep an Eye on Market Trends
The commercial real estate market is constantly evolving, and staying informed is crucial for maximizing your ROI. Pay attention to trends like shifting tenant preferences, emerging industries, and technological advancements that could impact your property’s desirability.
For example, many businesses now prioritize properties with eco-friendly certifications or advanced connectivity features like fiber-optic internet. By staying ahead of these trends, you can position your property as a top choice for tenants.
You should also monitor local market conditions to understand rental rates, vacancy trends, and expansion opportunities. This knowledge will help you make informed decisions about pricing, upgrades, and potential property acquisitions.
Give Your ROI a Boost
It doesn’t take much to change the finances of your property. A small one or two percent reduction in expenses combined with a one or two percent increase in income can take you from barely getting by to cash-flowing a significant amount of money each month.
