To add value to commercial real estate means doing improvements, that will enhance their value and ultimately increase cash flow. This is a way to breathe new life into existing commercial real estate markets.
With commercial properties that have become tired and/or obsolete, developers can create brand-new, desirable assets in markets that crave new inventory. Value-add components of a commercial real estate deal can include renovations, repairs, building reconfiguration, additions, subdivisions, vacancy lease ups, zone changes , and more.
Is Adding Value to Commercial Real Estate Easy?
Although this may sound adventurous and exciting, it is no easy or quick task. Value add investments require real estate investors who have expert knowledge in identifying the areas of the property where value can be added.
Even further, extreme due diligence, and accuracy in costs, timelines, and absorption are imperative when investing in value-add properties. Failing to do proper research on a market is a huge mistake investors make in their search for value-add investments.
The stand-alone key to value add investments is found in the due diligence .
The Purpose Of a Value Add Opportunity
If done correctly, the appeal to purchase a property that has a value-add opportunity is the ability to get creative and think outside of the box. Brainstorming ways to increase the NOI from when the property is purchased is the main goal.
There are many ways in which investors can do this, from making structural and cosmetic changes to updating the existing leases.
Below we will explore some of the potential ways in which value can be added to these investment properties enabling for an increased return.
12 Ways To Add Value to Commercial Real Estate
1. Reconfigure Space. Adding more space or dividing up space can go a long way in increasing commercial property value. Adding space such as parking or storage can easily increase value as both are always in high demand. Finishing unfinished spaces or building additions could also be a way to achieve this.
2. Outside “Facelift.” Clean up the outside of the property. Remove all trash, and paint the outside brick or siding, or replace it all together with. Sprucing up the outside of the property is a quick and relatively easy way to make a small(er) change look and feel like a drastic improvement.
3. Update & Modernize. The property building itself should be up-to-date and comparable to surrounding buildings in quality, and representative of the area’s aesthetic and style. It is also important to update the HVAC system to energy-efficient standards. Updating water heaters and lights will also create value-add.
Here are more reasons to modernize a commercial building.
4. Name the Property. Naming a property enables people to identify with its purpose and position in the market. The name can be obvious (STREET NAME Plaza) or something totally obscure (Sunny Acres Plaza). Either way, having a distinct name for the property begins to brand the property and creates memorability.
5. Update the Signage. The property’s signage should attract people from the outside and should also accurately represent a property’s purpose. Be sure that the signage is large, clear, visible, and easy to read. The investment in signage is always a value-add.
6. Increase Security. Security features such as alarm systems, gates, and shutters, can increase property value by making the property more attractive to tenants. These features also lower your insurance premium.
7. Know the Neighborhood. Knowing what other commercial properties in the area sell and lease for, and the general market value of the area, will be helpful in determining what direction(s) to go in for the commercial aspect of the property. Knowing what the area is lacking and what the local demand is will only help you further.
8. Find Tenants and Avoid Vacancies. Finding tenants and avoiding vacancies are likely the most obvious ways to add value to your investment. Finding reliable and long-term tenants is key.
Here are 6 ways to reduce commercial real estate vacancies.
9. Be Creative. Be creative when thinking of methods to find tenants. Consider move-in specials to attract new tenants as well as asking existing tenants to refer new tenants.
Here are 10 ways to find prospective tenants for a commercial property.
10. Change the Leases. Raising rents is the quickest way to increase your cash flow allowing you to put that money back into the property for value-add opportunities. Higher rents will also attract higher-end tenants. However, when raising the rents you must also be prepared to experience vacancies from current tenants who can no longer afford the rent increase.
11. Apply RUBS. Implementing a ratio utility billing system (RUBS) shifts the expenses of utilities to the tenants based on the size of their units, occupants, and use. This method will cost more for tenants, but it will bring more net income to the landlord.
12. Replace Property Management Company. Take a close look at the operation and efficiency of the property management firm responsible for the building. If the property is being mismanaged, or there are missed opportunities to reduce expenses, be sure to fix them.
Here are more signs it’s time to replace the property management firm.
There are many ways investors, and owners, can add value to their real estate investments or commercial properties. Many of the methods require updating the exterior and interior of the property, and changing lease terms. Whichever method you choose, it’ll be sure to add value to your real estate.
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Commercial real estate has always been an attractive and lucrative investment business. Its value has further increased with the increasing density of small businesses. The cash flow in commercial real estate business primarily depends on your strategy before investment and the potential of property to increase the value.
The following tips will help you add value to your commercial property in order to make the most out of it.
1. Make the Right Type of Improvements
There are two types of property improvements.
- Cosmetic improvements
- Substantial improvements
New carpeting, wooden floor replacement, new paint, new landscape, new décor, wallpaper, and other such changes contribute to cosmetic improvements. Cosmetic improvements are beneficial when you rent out your commercial property. However, if you want to sell it out then remember that the buyers may want to change the look and personality of the property. In such a case, avoid making substantial or functional improvements like renovating the lobby of office or multi-home building, and structural changes to the façade of a shopping center.
2. Monetize the Property with Rentable Square Footage
In commercial property, the usable square footage is the door-to-door and wall-to-wall space that is actually used by the tenants. Lobbies, storage rooms, hallways, rest rooms, stairwells, and other shared areas are not included in the usable square footage.
In contrast, the rentable square footage is the sum of usable square footage and the shared spaces. Rentable square footage rule applies when a tenant takes a complete portion or unit on rent. The landlords mostly bear the loss when they rent out a commercial property based on usable square footage. However, you can monetize the property and earn from its every square foot by transforming a multi-unit property into a set of individual properties. This way, the renters will not share spaces like hallways and stairwells and pay full cost for the unit.
3. Add Personality
The landlords can add personality to the commercial property by merging documental and physical personalities. Brainstorm about a nice name for the property. Define the characteristics of the name to renovate the exterior including paint, external landscaping, and introducing charming attractions or amenities to the property.
Some of the cost-effective amenities include free wireless internet, daycare and swimming pool for kids in commercial residential properties, and glass-walled meeting room in the office building.
4. Invest to Decrease Expenses
The modern offices comprise of green buildings. Similarly, the families prefer energy-efficient homes. In either case, you can make lucrative investments in the office or residential commercial real estate to decrease the utility expenses and make it an attractive property for renters and buyers. Some of these investments include large glass windows for sunlight free flow, energy-efficient light bulbs, and energy-efficient kitchen.
Security, a primary concern of the buyers and renters, can add great value to the property. For lucrative investments, install CCTV cameras in the building. If you want to go an extra mile for security then installing walkthrough gates and digital entrance and detection devices could be a good investment to add value to your property.
For information on Borelli Investment Company’s commercial property management services, contact us today.
Whether you’re looking to increase the value of your commercial property to boost occupancy, prepare to sell, or just upgrade to fit the changing needs of your current tenants, there are plenty of options available. Working with the right construction professionals can help guide you in the right direction, but these are some top tips owners should consider when they’re thinking of adding value to their property.
Upfit for Energy-Efficiency
While new commercial construction is generally more energy-efficient, these properties come with a steep price tag. Adding features to existing commercial property (like solar power panels, upgraded HVAC systems, and LED lighting) can offer energy savings to current and prospective tenants and make the listing more appealing when it hits the market. Other renovations can include better insulation, low-flow plumbing systems and fixtures, and recycled construction material for additions and remodels. Profit margins widen when the overall cost of maintenance and operations drop.
Repurpose the Space
Have your tenants’ business needs changed? Was your property recently rezoned? Is your local community evolving to serve a growing industry? Remodel your commercial property to be more universal, allowing the space to shift based on tenants’ needs or giving new buyers a “blank slate” for flexibility. Knock down walls, change the interior footprint, and invest in a deep clean that helps transform the space. You don’t have to add square footage to completely change how your commercial property looks, or how it can be used going forward.
Consider Curb Appeal
What a potential tenant or investor sees as they drive up to your commercial property leaves a lasting impression — don’t overlook the importance of keeping up with curb appeal. Make maintenance a regular habit; landscaping, repairs, and updated exterior paint can offer huge ROI. Additions like lighting or new walkways are also low-cost upgrades that will pay off when it comes time to sell your commercial property. New building signage offers a fresh and modern look to the exterior as well, giving tenants and employees a renewed sense of pride in their workplace.
Secure the Structure
Get in touch with a commercial construction firm to come and evaluate your property for structural damage or signs of degradation. A thorough assessment will reveal any issues that need repairs, and ensure that the frame of the building is holding up. A qualified team will also look for signs of foundation or roof damage that need to be addressed before they become much bigger (and more expensive) repairs. This inspection is crucial for commercial property owners looking to sell, but it’s also a good way to avoid any business disruptions for current tenants that may have to temporarily close or relocate during construction.
Add Some Amenities
Making your commercial property more functional by adding amenities is a surefire way to increase its value. Some examples: daycare spaces are great for office buildings, outdoor courtyards can offer a peaceful respite for healthcare facilities, additional loading docks improve productivity for warehouses, and playgrounds are perfect for schools and educational facilities. These are marketable additions that help your property stand out from the competition, whether you’re a landlord or an owner looking to sell.
Don’t Overlook the Little Things
Small improvements can turn out to offer big value, so don’t underestimate smaller projects. How does your property’s parking lot look these days? Resurfaced and/or expanded parking lots can be quite appealing for retail businesses who want to up their customer service game. Upgrade exterior lighting and add a security camera system to improve safety and security, and potentially lower liability insurance premiums. Improve internet infrastructure to facilitate fiber capabilities if it’s available in your area. All of these little things will add up, exponentially improving the value of your commercial property.
Commercial real estate property can offer a lucrative channel for income, whether as a landlord or an investor who “flips” purchases for a profit. The right upgrades can justify raised rental prices and increased market value — both of which lead to a bigger bottom line. The success of your project depends heavily on the commercial construction team you choose to do the work.
When looking to improve the value of commercial property, it is critical to have a construction company that can properly react to needed updates and changes and provide the best, most efficient outcome. G. S. & S. specializes in the fast track method of Construction And Building Services — let our team of design-build experts make your vision a reality and help get the most value out of your upgrades.
It has always been a good investment to own a commercial real estate. With the ever-growing number of small businesses, the value of this real estate is even higher than before. However, its value significantly depends on your strategy before you actually start investing in it.
In order to spend your money wisely on your commercial property, pay attention to the following tips.
1. Increase its size
Additional square footage can help raise the value of a commercial property. Of course, you need to bear in mind what is the use of the property – according to the usage, you will decide whether it needs one more office, bigger parking space or a conference room in its premises. Before you start with the building, consult local authorities regarding the approval.
2. Increase the rentable square footage
You need to know that there’s a difference between total square feet of your property and the rentable square feet. If the rentable part of the property is significantly smaller than the total size, it means that a big part of your property can’t be monetized, which is one of the advantages of owning a commercial property. If the design is poor, having too many lobbies and incomplete areas, it will make the property unfit for renting. Do your best to use the incomplete parts to make it appropriate for renting.
3. Make it eco-friendly
Even though this type of investment is more expensive than other techniques, it has become a common thing in many countries, especially in Norway and Sweden, where environmentally-friendly buildings are more attractive to tenants. For example, the most environmentally-friendly hotel in the world has been built in Nordland, the northern part of Norway. It is clear that it’s important to keep up with the latest trends, so you should include sustainable features in your commercial property, like solar panels, energy-efficient appliances and tinted windows. Just a couple of changes like this and your bills will be lower, while the updates can even make the open space look more appealing. In countries like Japan, the United Kingdom, France and South Korea there are even certain tax breaks for making a property eco-friendly, so check with your state or federal government about that.
4. Improve the parking lot
This is a highly useful method for increasing value but frequently overlooked. A parking lot can be improved by adding a certain security features such as alarm systems and gates or even security guards. Your insurance premiums can get lower by adding these features.
5. Improve its exterior
External improvements can add value big time but without being costly, as noticed by experienced property valuers from Sydney. Firstly, painting the outside brick won’t force you to make big structural changes but will give it a fresh new look. Next, pay attention to the doors and windows. If they are outdated or poorly designed, consider replacing them with something modern and practical. Invest in safe and high-quality doors and windows – the tenants will appreciate it. Next, think about the aesthetics of the windows and natural light – it is a big thing what kind of blinds you’ll opt for. For instance, commercial blinds can serve both for protection from bright sunlight and are easily managed so that you can choose how much natural light you want, but also serve the aesthetic purpose, giving a statement about the business.
6. Update the signs
When entering a business building, everybody will instantly notice the sign representing your brand, so make sure it isn’t hidden by landscaping, broken or difficult to read. Keep it up to date and play with different ideas on its size, style, location and material.
The important thing is to have a clear plan on the improvements before you start spending the money. That way, you’ll avoid mistakes and maximize your profit.
A good energy management strategy is known to reduce operating expenses and add great value to commercial real estate assets. The initial investment in an efficient HVAC system may be high but the returns on this initiative justify the expenditure. At the same time, an energy monitoring system can eliminate areas of inefficiency to help you realize the highest return on these efforts. Other improvements that can be made at the design stage include proper orientation of the building, right material for the building façade and including large glass windows. Once the building is operational energy-efficient light bulbs and use of solar energy can make it more sustainable.
• Make improvements to the property
Improvements can be categorized into two categories- cosmetic improvements or substantial overhaul. Cosmetic improvements entail improving the appearance of the commercial property and include new paint or wallpaper, new décor or landscaping, and new carpeting/flooring. On the other hand, a substantial overhaul is more complex and involves making structural improvements to the property. This may be in the form of changing the façade or renovating the lobby of the building.
• Beef up security
Security is a major concern for tenants and occupants and any improvement on this front can add tremendous value to the commercial property. You can create a more secure office environment by installing CCTV cameras in the office building. Other safety measures such as digital entrance, detection devices and installation of a visitor management system lend a positive perception to your commercial property.
• Add amenities
Amenities add personality to your commercial property and make it more attractive and appealing. Some facilities that will be greatly appreciated by tenants include wireless internet, gymnasium or a daycare center in your office building.
By adopting the right strategies, you can enhance the value of your commercial property while significantly reducing operating costs and thereby increasing the net operating income (NOI). At Citadel, we service the requirements of a wide range of clients by offering unique spaces that meet their specific needs. We have the expertise and experience to help you formulate the best strategies that add value to your commercial property. Get in touch today!
If you are thinking about purchasing commercial real estate, it’s important to know that there are things that you can do to enhance and increase the value of your investment. As such, when you search for a commercial property, look at the property’s potential in addition to its historical data. Because the value of commercial real estate is primarily driven by the cash flow that the property generates, any strategy you employ has the potential to increase your cash flow, decrease your expenses, and increase your overall equity and the value of the property. Below are five strategies you should consider when determining how you can make the most out of your commercial real estate investment.
1. Make Improvements to the Property
Improvements can take the form of cosmetic improvements or substantial rehabilitation. Cosmetic improvements include such things as new paint or wallpaper, new decor to the common elements, new landscaping, new carpeting/flooring, etc. Substantial rehabilitation involves making structural improvements to the property – for example a substantial rehab may involve redoing all the units of a multifamily property, or changing the structural façade of a shopping center, or making major renovations to the lobby of a large office building. In any case, you increase the value of the property for not only your tenants, but for your own portfolio as well.
2. Increase Rent
The value of your commercial real estate property can also be increased by increasing the rent. In reviewing the historical data on a property, take notice of whether the tenants are paying market rent or whether there is potential for a reasonable mark up in rents. Determine how the improvements you make to the property can justify your rent increase. Pay close attention to both the upper and lower level of rents that are being charged for similarly situated types of real estate so you don’t price yourself out of the market.
3. Decrease Expenses
Evaluate the historical operating statements of the property to determine if there are areas where you can decrease the expenses. For example, perhaps improving the property with more energy efficient light bulbs in the common areas will drastically reduce your monthly electrical bills. Or perhaps you find that the gas company can individually meter the units so that instead of paying for the gas, you can fairly pass that expense onto the tenants. In the vast majority of instances, a commercial property owner can cut expenses without significantly impacting the operations of the real estate itself.
4. Alter or Change the Property’s Intended Usage
Often times, changing the use of a commercial real estate property can drastically change the value of the property. For example, suppose you find an old industrial warehouse in the middle of a bustling epicenter. Instead of keeping it as an industrial warehouse, you can seek a zoning variance to convert that warehouse to a hotel, or a condo building, or an office building, or any commercial use that makes sense for that location.
5. Add Amenities
Finally, you can also consider adding amenities to the property to make it more appealing and valuable. Value enhancing amenities can include something simple like creating a playground in a multifamily property or adding free wireless Internet for your retail tenants. Or you can add more extravagant amenities like a daycare center in your office building or an outdoor courtyard in a hotel property.
In sum, when scouting for commercial properties, look beyond the historical data and see what strategies YOU can employ to make the property more valuable. Know your property’s potential before you close the deal. The best deals are made when you buy a property, not when you sell a property!
By: Lauren Vo Zelakiewicz, President & CEO, VEC Financial Group (now defunct)
If you own commercial real estate, I believe that the ten best ways to increase their value is through rent increases, operating expense decreases, making improvements to the property, adding amenities or exploring other income producing ideas, review/challenge the existing property taxes, change the management company and/or leasing company, change the zoning or use of the property, have tenants pay for the utility costs, divide the property and creatively negotiate the leases whether they expire now or later.
1. Increase Rents
- Increase below market rents when leases expire: Review the market to determine the average rent; if you are below the average for your type of property, increase the rents accordingly. Increase the rent over time for existing tenants; however, when renting a vacancy, charge at the new increased rate. You can check rental rates by going online to search for “rent rates” or by contacting a local property manager or leasing company in the area.
- Expand existing tenants into larger space.
- Improve credit-worthiness of tenants when filling vacant space (improves the cap rate) by marketing vacancies to regional or national tenants. You don’t necessarily need to increase the rent, you should be able to sell the property at a better cap rate with better credit tenants.
2. Decrease Operating Expenses
- Compare your expenses to market: Review all of your expenses carefully and analyze them on a per unit basis and a cost per square foot basis, as these are industry standards. Compare each expense with your other properties. Talk with your property manager or a local experienced property manager to compare with other properties in the area. If some of your costs are higher than the standards, you’ll know you need to explore ways to decrease them.
- Competitively bid all of your contracts, including insurance.
- Convert gross leases to net, double net or triple net leases.
3. Make improvements to Your Property
For office buildings, shopping centers and industrial buildings, cosmetic improvements can make a big difference – and may enable you to increase the amount of rent you charge. Give the exterior a makeover, improve the lobby, or repave the parking lot to enhance the property.
In the case of apartment buildings, you’ll get more mileage out of fixing up the interiors, installing new appliances, or doing a landscaping face-lift.
4. Add Amenities or Explore Income Producing Ideas
Amenities you might add:
• concierge services
• a fitness center
• a conference room
• a business center with a fax machine and copier
• a coffee bar
Income producing ideas include:
• renting your roof space for cell towers
• adding a laundry room and coin operated machines to an apartment complex
• renting your common areas for art shows, car shows or kids rides.
5. Property Taxes
Get an appraisal for your property and appeal the appraised amount if the appraisal is lower. Retain a real estate attorney who specializes in tax appeals to assist you, or hire one of the companies that get paid based on the savings they get for you based on the appeal.
6. Change Management or Leasing Companies
Sometimes all that’s needed is looking at your property through a new pair of eyes. Different energy or philosophy can add value to your property. New managers or leasing agents may be able to give you ideas on increasing income, decreasing expenses and giving your property a fresh, new look and feel.
7. Zoning or Use Change
Changing the use of a property can significantly change the value of the property. Examples are:
• changing an industrial space into a retail use
• renovating a hotel to apartments
• adjusting regular office space to medical office space
8. Have Tenants Pay for the Utility Costs
If you are paying for the electricity, gas and/or water usage in office buildings or apartment complexes, look into separately metering or sub-metering the utilities, and pass the costs on to the tenants.
If you have a boiler, you may want to install baseboard heating in each unit so the tenants can control their heat and pay for it.
9. Divide Your Property
If you own land, breaking it down into smaller parcels can get you more per acre or square foot. Also, you could put in roads, add utilities, or entitle the property, all of which can substantially increase the value of the property.
10. Negotiate Existing Leases
If you are trying to sell the property or borrowing money on the property, it’s better to have long term leases in place. A five or ten year lease with rent increases is worth more to investors and lenders than a one year lease. Renegotiate or extend existing tenant leases to maximize the value of your property. Whenever the tenant asks for something that is not your obligation, it can be a time to negotiate something out of the lease. In other words, if they ask you for something, it’s time to ask for something back. Improve your leases whenever you can.
As I say throughout my blogs, if I may be of assistance with your real estate questions please contact me. My way of giving back is to give away my knowledge. Thank you for reviewing this blog.
6 Strategic Upgrades That Add Value to Commercial Office Space (and make tenants happier)
As building owners and operators, we are constantly determining how to get the most value out of our office assets. While commercial property management can come with a lot of challenges, once you know which upgrades can have the most impact, it can be a very lucrative and rewarding investment strategy.
Here are 6 strategic upgrades that improve your property and add to it’s value – resulting in happier, longer term tenants.
1) Improve the Lighting
Installing better lighting in more areas is one of the most cost-effective yet dramatic ways to improve the appearance of a space. In addition to adding light fixtures, you can also consider adding energy-efficient light bulbs as well. LED’s, for example, use 25 to 30 percent less energy than incandescent light, and last 25 times longer. That’s a significant saving that increases your cash flow and your property’s overall value in the long-term.
Some specific lighting changes to consider:
- Add recessed LED bulbs to maximize the light level without affecting the visual flow of a space.
- Remember to choose the LED color temperature wisely. Light temperature depends on the Kelvin value of a bulb. A lower Kelvin value means the light will be warmer and more yellow, which comes out as a cozier light. A higher Kelvin value means the light will be bluer, considered an energizing light.
- In general, office common areas look best with LED bulb values between 3500 and 4100 K, while bulbs with a value of 5,000 to 6,500K are best for office workspaces.
2) Make Small Spaces More Purposeful
When it comes to commercial space, too often we see that highly-trafficked areas like hallways and bathrooms are overlooked. Corridors are the backbone to a commercial building – whether it’s for tenants or employees – these spaces can have a decided impact on one’s experience in the building. Are your corridors wide enough to comfortably fit multiple wheelchairs at a time? Are your elevators in the right places to enhance functionality? Are your bathrooms in key places like the lobby – and are they updated enough to match the quality of your brand? By being more thoughtful with these transitional areas, you can provide a much better experience for both your tenants and their guests.
3) Be Energy Efficient
By making your space more energy efficient it can lower your utility bills and lessen your carbon footprint. Office equipment is becoming one of the fastest-growing electricity uses in commercial buildings in the United States as stated by The American Council for an Energy-Efficient Economy (ACEEE). Moreover, it consumes around 7 percent of the total commercial electric energy of a business. Given this data, commercial energy consumption translates into $1.8 billion in electricity costs to businesses. Pay close attention to the condition of your roof, doors, heating and air system and appliances throughout your office building. If they haven’t been upgraded in a while – now’s the time to look into it.
In addition to the condition of the building, you can make a few small changes that can provide dramatic savings such as switching from desktop computers to laptops and turning off equipment that is not in use. Utilizing power strips or self timers are a great way to effectively keep your energy usage in check without having to remember to shut something off.
4) Consider Wellness Rooms
While it may not be in the budget to add a standard gym or fitness center to your office, there are other ways to incorporate health-driven components into your building. Designers are increasingly seeing requests for workplace wellness rooms, a space that can be interpreted in a multitude of ways: it might be a place for yoga and meditation, it could be a maternity room for mothers of newborns to pump, it might also just be a reprieve. Sometimes all you need is a room dedicated to serenity with proper lighting and comfy chairs.
5) Create Different Types of Workspaces
Another important consideration to bear in mind when contemplating an office upgrade is the creation of different types of workspaces. A forward-looking office includes dynamic workspaces of different types that include:
- Individual work areas
- Meeting rooms of different sizes
- Collaboration zones
- Social or break areas
6) Make It Environmentally Friendly
In today’s marketplace, buyers are becoming more interested in the environmental impact of the buildings they are considering, regarding efficiency of energy, water usage and environmental footprint. Analyze your opportunities to harness commercial technologies including solar power, energy efficient light bulbs, low flow water-saving plumbing appliances, increased insulation, and recycled building materials when making upgrades and renovations. These components can lower your expenses while diminishing environmental impact, and there may be tax incentives to invest in green technologies.
By paying attention to these points when considering a commercial office upgrade, you not only will end up with a truly dynamic, functional workspace, but also your tenants will be happier, more content, and productive with a suitably designed, upgraded office. As a result, business will profit from an array of benefits.
If your space is attractive, you’ll have tenants lining up to see it. Tenants may still request changes to the space, but by implementing these features, you’ll limit the tenant improvements (TI), and ultimately improve your ROI down the road.
With any commercial investment it is important that business owners are able to see both demonstrable benefits and a concrete return on their outlay. When it comes to commercial roof replacement some advantages are obvious – your roof will be aesthetically more pleasing, a new roof should require less maintenance, and depending on the style of roof you opt for you may benefit from increased building efficiency in terms of your heating costs. But exactly how quantifiable are the benefits of roof replacement in terms of cold hard cash?
If you are considering selling your commercial property then installing a replacement roof could be a very lucrative move. According to commercial property agents the nearly half of your premises’ curb appeal comes from its roof, with some estimates claiming as much as 6% in value can be added to your sale price with the addition of a new roofing surface.
If the sale of your property is a likely step you should aim to investigate what prospective tenants expect of your roof, in order to avoid under or overspending on roofing styles which may not be financially beneficial.
The Benefits of Commercial Roof Replacement
Much of the purported additional value from a new commercial roof comes from the assumption that a newer surface will provide the new owner with financial benefits in the form of lower maintenance costs.
By replacing a roof with a modern, reliable surface you not only reduce future spending on roof repairs, but you also eliminate the costs associated with the damage a leaking roof can cause. Eliminating the risk of mold, rot and pests in your commercial property is certainly going to add value to it, especially if this protection can be demonstrated over a significant period of time.
Adding increased efficiency to your commercial premises is another easily quantifiable financial benefit of full roof replacement. By calculating your current heating costs and the projected amount saved by the use of a more insulating surface, you can directly predict when your outlay will bring about substantial returns.
If you add additional features such as solar panelling or green roof systems these figures can be boosted further, with equally measurable financial outcomes. With many new tenants considering a building’s green credentials before purchasing, the energy efficiency rating of your property could end up being worth thousands of pounds more than the costs required to achieve it.
Of course it is recommended that you should discuss your financial expectations with commercial roofing contractors before undertaking any work, but most roof replacement specialists are happy to advise on the most financially worthwhile strategy for both your roof and budget.
If you have any questions on which roofing style might increase the value of your commercial property the most, contact Roofing Consultants today for friendly, expert advice.
With everyone from Colliers to Newmark biting their nails about the commercial real estate sector, especially urban office markets, there’s never been a better time to prioritize strategies that add value to commercial real estate assets, while recalibrating portfolios for the new reality. Thankfully, Newmark has identified the six fundamental trends emerging in commercial real estate, which can serve as astrolabe for the intrepid navigator of this ever-changing sector:
- Rising Construction Costs are Translating into Increased Tenant Improvement Allowances
Growth of Food & Beverage E-Commerce is Increasing Demand for Cold Storage
Baby Boomers are Enhancing Demand for Multifamily Units
The Technology Sector is Driving Creativity in Office Design
New Hotel Brands & Concepts are Emerging in a Competitive Market
Office and Multifamily Development are Increasingly Intertwined.
As trade policies and skilled labor shortages continue to impact the construction sector, landlords faced with ballooning tenant improvement allowances may have to dip into the dry powder of restructured lease agreements, to extract more value when attempting to add value to commercial real estate assets. Applying a RUBS approach to subleased utility contracts can reduce exposure to a fluctuating bottom line and lock-in net positive contributions to the cashflow of each property. This can be especially effective if matched by an aggressive campaign to rent out unused and idle storage space, by the square foot, with a contractual line item linked to utilities.
Continuing with the storage theme, a repurposing of commercial property portfolios may be in the offing, as the boom in e-commerce grocery sales drives a manic hunt for available refrigeration facilities nationwide. This is beginning to look a little like the drive-in cinema, drive-through food, and drive-away car wash booms of the previous century – but this time powered by the awe-inspiring pace of digital connectivity. We may never see such overnight repurposing mayhem again in our lifetimes, but if this trend is here to stay, then commercial landlords may be staring a gift horse of opportunity in the mouth, as the service sector scrambles to meet the demands of the home-office bound gig economy while adding value to commercial real estate assets at the same time.
Urban commercial real estate landlords should chin up and refocus: the Baby Boomers aren’t going anywhere. If anything, they’re leveling up, refurbishing the attic, and extending a spare bedroom into the garage, as Millennials and Zoomers struggle to leave home – and the digital economy offers greater opportunities for itinerant remote workers. This residential trend in the inner city will inevitably bolster receipts for commercial properties into the next decade, as long as commercial landlords hone in on the needs of multigenerational families, building new identities within and around urban retirement neighborhoods.
As the technology sector continues to take the gale-force brunt of change sweeping the global workforce, those courageous companies that do decide to maintain an urban office presence are having to double-down on their efforts to attract the most life-work balance sensitive generation in the history of employment. Commercial landlords seeking to close with this constituency must have an intimate understanding of the collaborative work-spaces and highly-amenitized office environments expected by this aspirational group.
The hotel industry remains a bell-weather indicator for the commercial real estate sector, providing an insight into the flow of humanity through the economy. Encouraging data has proven that the underlying fundamentals driving the Trump-era economic boom are more resilient, long-term, and robust than the age of doom would perhaps suggest. Savvy analysts at the major commercial real estate firms should sharpen their pencils in the coming months, to assess where this energy is gathering, and decide how best to serve the commercial needs of the traveling workforce. Deep investments in logistics, storage, courier post, taxi technology, data hosting, and conferencing innovations could pay enormous dividends as the global workforce continues to forgo the office and take to the open road.
Driven by social trends led by Boomers, their Millennial offspring, and their Zoomer kids, combined commercial/residential spaces are surely the next major real estate sector to dominate the 21st Century. Proof of this need and emerging preference abound across every graph and data point – and deserve a special mention, as both the summary and theme of this short pep-talk. If you’re pulling your hair out at the calculator, looking for ways to dodge the many bullets of these trying times, the life/work living habits of the Boo-Mill-Zoomers may give you some solace, hope, and inspiration for your properties.