If you own or manage a commercial property or are considering purchasing commercial real estate (CRE), you should know how to add value to your property. Value-add opportunities for CRE typically include making improvements in an effort to enhance its value and increase cash flow.
You might add value to commercial property with upgrades like modern amenities, new landscaping or cosmetic changes. Learn how to increase the value of commercial real estate below.
1. Renovate Inside and Out
Renovations can help improve your commercial property value. Consider updating the look and rearranging spaces to update the layout of the building. These improvements might be surface cosmetic or substantial structure rehabilitation. Examine your overall space or, better yet, bring in an experienced third party to assess it for you.
Cosmetic changes include things like:
- A fresh coat of paint
- New wallpaper
- Fresh decor elements in common spaces
- New flooring
- Repaved parking lot
- Aesthetically pleasing landscaping designs
For office buildings, industrial buildings and shopping centers, these aesthetic upgrades can make a huge difference and might allow you to increase the amount of rent you charge.
Be sure to also give the exterior a makeover, repave the parking lot or upgrade the lobby to enhance the property. Upgrading the cosmetics of your property might be the deciding factor in signing a new tenant. Making strategic renovations can help deliver a strategic return on your investment.
2. Modernize the Property
Outside of cosmetic changes, updating the technology and amenities within the property is another excellent way to increase the value. You should update lights, water heaters and the HVAC system to energy-efficient standards. Ensuring your space aligns with modern amenities and finishes can create a long-lasting value-add.
While updating bathrooms or improving areas like courtyards is more labor-intensive and comes at a higher cost, these renovations last years and add longevity to your commercial property. These modernizations will make old spaces feel fresh and generate an overall buzz for potential customers.
For example, when Target began remodeling its stores in 2017, it celebrated an 8.7% increase in sales just two years later. Renovating your retail space can boost sales by creating a fresh atmosphere for the shopping experience.
3. Improve Outdoor Spaces
Updating landscaping is another excellent way to potentially increase commercial property value and attract new potential clients to your doors. You can improve your outdoor spaces by:
- Removing all trash
- Adding tables and chairs
- Adding walkways or paths to outdoor common spaces
- Painting the outside brick or siding
- Mowing lawns regularly
- Adding flowers, greenery or decorative rocks in common areas and along paths
- Building rooftop terraces for additional seating
- Paying attention to commercial roofing by scheduling regular inspections and repairs
Sprucing up the outside of your property is a quick and easy way to make smaller changes look like significant improvements. The goal should be to create something enticing where people want to spend time.
4. Give the Property a Name
Giving your property a name is an excellent way to create value-add by helping people remember it. Naming a property also allows people to understand its purpose and position in the market. The name might be as obvious as the street it resides on or something more obscure. Either way, having a unique name for the property can establish it as a brand and create memorability.
5. Avoid Vacancies
Constantly having tenants is a great way to show that your property is a great place to do business. It can also help you create a waitlist. To avoid vacancies, you should:
- Ensure your rent and operating costs align with the market and adjust if needed.
- Hire a leasing agent specializing in your industry, whether office space, retail property, industrial building or something else.
- Immediately list any vacancies on various outlets, such as social media channels, Craigslist or LinkedIn, to generate responses.
- Ensure your for-rent signage can be easily viewed by both walk-by and drive-by traffic.
- Complete any repairs as soon as possible.
- Be kind and respectful toward your tenants.
- Offer longer leases to keep tenants at your property longer.
These are a few strategic tips you can employ to avoid vacancies and keep tenants longer. Every landlord’s situation is different, so you’ll want to find the strategy that works for you to improve your property’s value-add.
6. Increase Rent
Increasing rent can boost your cash flow, but you have to be prepared for vacancies from tenants who can no longer afford it. Making the above updates helps your chances of keeping and attracting new customers to justify rent raises. When leases expire, you might raise the rent, especially if you’ve made significant property updates.
Upgraded properties will cost more because they tend to attract more business. The extra money obtained from monthly dues can help you create a budget to recycle funds into your property. You can determine whether to raise the rent by ensuring it aligns with the market or searching for rental rates online.
7. Update Security
Tenants want to feel safe and secure when using your facilities. Upgrading to a modern security system is a simple way to help increase commercial property value.
Security features you might add or update include:
- Alarm systems
- Code-activated barriers
- Tinted windows
- Keyless entry systems
- Security guard services
These can create value-add by making the property more attractive to tenants and protecting your assets from potential theft and liability. These features can also add value by helping you track who enters your property. Some insurance providers might even offer installation discounts.
Overall, security installations can attract customers, promote safety and protect your property from unforeseen financial loss.
8. Expand the Property
Another possible way to increase the value of a commercial property is to expand it. Expanding your property increases space and can help you gain new tenants. With more space, you can introduce more facilities, as well.
It’s essential only to expand if you have a use for the space. Empty rooms and unused courtyards can harm your property value. Ensuring your areas are full and attractive can entice new tenants and help you increase value.
Need Help Leasing Your Commercial Property?
As you now know, there are various value-add opportunities for CRE. Whether you have an office block, a shopping center or an industrial building, upgrading your commercial property can be lucrative. When you need help leasing your commercial property, Zommick McMahon Commercial Real Estate is here for you.
Founded in 1949, we have many years of commercial real estate experience and will develop innovative solutions to help you lease your property. Our brokers can help you keep your property occupied for the long run so you can get everything you need from your investment.
Contact our team today.