“Increasing the Value of Commercial Real Estate for Lease” written by Mike Marko
Looking for effective ways to increase the value of your commercial real estate for lease?
Managing a commercial property entails both a lot of time and effort from the property manager. Aside from attending to calls or complaints of the tenants, the property manager is also responsible for ensuring that the commercial real estate for lease retains a steady revenue and continues to attract potential tenants.
With so much demand from companies for office space, it’s no surprise that the competition for commercial buildings is aggressive. Your commercial real estate needs to stand out from the opposing properties. Otherwise, it will be overshadowed and subsequently ignored by companies.
To prevent that scenario from happening, the value of your commercial real estate for lease needs to be increased and be made irresistible to potential tenants.
That’s why in this blog post, we will tackle the improvements your property will need to undergo to result in a positive cash flow and reduced vacancies.
Improvements Needed for Commercial Real Estate for Lease
Improving the appearance and available amenities of your commercial real estate for lease is a sure way of making it stand out from the competition. Regularly updating and maintaining the property increases its value significantly and thus, making it more appealing to companies looking for office space.
But what exactly are the specific ways to increase the profitability of your commercial building?
Read on to find out…
Make Changes To The Property
Before starting the process of adding value to your property, consider the competition. Evaluate the other commercial properties in the area and see what they are offering to tenants that you can match or even improve.
Understanding what you need to do to bring your commercial property up to a level to compete with other properties in the area is the first step to determining changes for your property. Commonly you would begin your improvements for your commercial properties on the property’s appearance and structure. Some properties just need a facelift and new paint while others might need a complete overhaul and new structure.
Depending on your property’s purpose, normally its value can be increased by adding any of the following structures within the property: office space, warehouse, storefront, parking, storage, conference rooms, or employee lounge.
Increase Rent Spaces
If your commercial property is an office building then you might consider adding additional office space utilizing unused space within the structure. Prior to altering or adding additional office space, you should make sure all areas of your properties are rentable before you increase its rent spaces. Adding to the rentable area will increase the profitability of your commercial rental business.
When considering or determining if you can add rentable space to the commercial property you need to evaluate total square feet vs rentable square feet. The difference between total square feet and the rentable square feet can affect your rent spaces. The rentable square feet of your property is where you can generate income. While total square feet for the building could include hallways, common areas and otherwise unrentable areas in the structure. If you have open areas of rentable square feet you can consider finishing incomplete parts of the commercial real estate for lease or try converting any currently un-rentable areas into rentable areas.
Improve the Appearance of the Building
Improving the external appearance of your property can greatly influence its value. An attractive and pleasing exterior attracts tenants. After all, who would want to rent a space in a building that looks broken-down and in poor shape? While renovating the appearance may seem like an expensive endeavor, there are actually simple ways to achieve it.
Often times, all it takes to improve the appearance of the property is a matter of ensuring that all areas are kept spotless. Make sure the grounds, parking lots, bathrooms, and walkways of your building are cleaned regularly. Steam cleaning, power washing, or even painting over dirt and built up grime on the structure is a very cost-effective way of improving the appearance of the structure. Additionally, you might consider investing in new windows which can greatly improve appearance, increase natural light, and even help reduce heating/cooling bills while improving the overall appearance of the structure.
Increase Security and Parking
Adding security features and parking can increase property value. Safety is a big issue for companies as they often deal with confidential information on a daily basis. Having alarm systems, surveillance cameras, security systems, and other security features will give the tenants a higher sense of security while renting the property.
A commercial real estate for lease that can assure tenants a solid 24/7 protection increases its chances of being chosen over the competition. Security features in addition to keeping tenants safer will also lower your insurance premiums against loss and damages. Another way to increase security for the property is to hire private security guards to provide additional security and minimize any possible threat or damages to the property.
The value of a commercial property depends largely on its profitability. Profits can be increased by either increasing the rent or decreasing the expenses incurred. While decreasing expenses might seem like you are choosing to reduce quality, this is not the case.
One of the most effective ways to reduce costs is to immediately attend to repairs and maintenance issues when they occur at the property. This will allow you to avoid having to shell out substantial money for major renovations and repairs in the long-run.
Other ways to decrease expenses without damaging the quality of your commercial properties operations are detailed in the next sections…
Reduce Costs in Energy
Reducing energy costs and what you have to pay out for the operations of your commercial property is an easy way to reduce costs. In addition to reducing costs, you can ensure your tenants that your property is using energy-efficient heating and air-conditioning, water heaters, and lights. Upgrading A/C, heating systems, and other property features can also yield lower energy costs for tenants and landlords.
Adding energy efficient light bulbs throughout the property may cost money at first, but due to their efficient ways of operating they may actually save you money in the long-run. Commercial properties that are investing in modern heating and air conditioning systems are also reducing costs over time while offering tenants upgraded rental experiences.
Let Tenants Shoulder Utility Expenses
A common way of reducing your costs as a property manager is to transfer and make tenants responsible for utility expenses at the property. In your lease agreement, include a clause where your tenant is responsible for paying for some, and in many cases when they occupy the entire building, all of the utilities of the commercial property. This is a reasonable request as they are the ones who will be making use of the utilities on a daily basis.
Sign a Contract with Suppliers
Reducing repairs and maintenance costs is another way to reduce your costs at the commercial property. Most commonly you can negotiate and strike a partnership with dependable contractors for a long-term contract instead of paying for repairs as they occur. A long-term commitment to the same company usually means great discounts, less major costs because the property is more closely monitored which will help you reduce costs.
Conduct Consistent and Regular Maintenance
Having a contractor or handyman available to make repairs within 24 to 48 hours will also help to reduce costs associated with the commercial property. A consistent maintenance of your property will reduce your expenses as it will help you oversee repair issues that could possibly turn into major problems in the future, if left unattended.
Modernize The Commercial Property
Consider modernizing your building to attract and keep tenants for long-term stability and profitability. When modernizing your commercial real estate for lease, make sure that every change creates more value than it costs. Adding cost energy efficient utilities and systems like A/C and heating is one way to reduce costs. Also, you can consider upgrading the roofing of your property since this is one of the simplest ways to modernize its appearance without spending too much and increasing the efficiency of the building.
Plan How to Increase the Rental Property’s Income
Knowing the competition in the area and the prices they rent to tenants is key to deciding if you are able to increase rents. The first steps to increasing rents are to make sure that you are pricing rents competitively. Remember that when it comes to choosing an office space to rent, most tenants consider the price to play a big factor in their decision-making. If your rents are lower than other buildings in the area then when vacancies occur you should increase rents to market demand. Existing tenants can justify rent increases with the addition of amenities and more energy efficient systems installed for their use at the commercial property.
Before making the final decision about increasing the rents for your property, you should study other commercial properties in the area.
What are they offering? How much are they asking for? This will help you determine which direction to go and how you will stand against the competition.
Try these simple but effective ways of making your property more profitable.
Name the Property
Naming the building and finding different ways to set it apart from others in the area will make it more desirable and you could charge larger rents. A simple way to set your building or property apart from others in the area is to name it. Doing this will make it easier to identify its purpose and position in the market. You can even try selling the naming rights to a tenant if your property is not occupied by different business owners or firms.
To make your property more memorable, make a petition where you would change the name of the street or road where your property is located. This is usually done if the address of the commercial property is odd or extremely difficult to pronounce.
Develop a marketing strategy that utilizes all free (internet, social media) and paid (websites, local papers, internet ads) advertising to bring in the best most qualified tenants for your property.
If you’re thinking of effective but less expensive ways to find potential tenants for the commercial property for lease, then consider offering move-in promos. Asking your existing tenants to refer new tenants in exchange for an incentive is always an effective way to acquire new tenants.
Keep an open communication between yourself and tenants to easily address their issues and concerns when needed goes a long way to keeping them happy as renters in your property. Put considerable effort in keeping them satisfied with their space to discourage them from entertaining any thoughts of leaving.
Maintain an excellent relationship with your tenants, solve their issues, and do repairs quickly. When you communicate regularly with your tenants you can expect any possible needs that will arise so you may address them before they even come up. Be the most dependable property manager so tenants will not want to leave your property.
Raise The Rent
Property managers should be careful in increasing rent. If the property is leased by small types of businesses or low-income tenants, raising the rent is not advisable. You’ll end up with vacancies if you decided to raise the rent. Since they have a limited capital, staying in a commercial real estate for lease with a high rent would be risky for their business.
Raising the rent is only acceptable if the commercial property has higher-end tenants or if nearby property rents are higher. You should be competitive with other buildings and properties in an area when setting new rents.
Show loyalty to long-term tenants and consider negotiating additional terms to keep them happy on your property. Offer long-term lease discounts while raising rents slowly. However, make sure that the increase in the rent is a result of a recent investment or improvement to the property and not simply an excuse to make more money.
Final Thoughts About Increasing the Value of the Commercial Real Estate for Lease
With so much competition in place for commercial buildings, it’s natural for property managers to worry about how they will be able to make their commercial real estate for lease stand out. This can be done by increasing its value to both existing and potential tenants, which is only possible by undergoing necessary improvements.
In this blog post, we talk about several ways to increase the value of the commercial real estate for lease. This includes improving the building’s appearance, increasing its rent spaces, security features, and parking space. However, before making the changes, evaluate the competition first and see what they are offering their tenants. Make your changes in order to match or exceed their facilities.
You should also consider upgrades such as using energy-efficient heating and air-conditioning system, water heaters, and lights can make a big difference. Conducting regular maintenance, and modernizing your property can also decrease your expenses in the long-run.
If you have questions regarding commercial real estate for lease, just leave them in the comments below.
If you need help marketing your business online then check out IM Consultant Services.
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