Top 8 Tips On Increasing Rent & Maximizing Value
Owning a commercial real estate asset comes with many challenges, excitement, and rewards. While many commercial real estate projects have the possibility of being a glamorous affair, at the end of the day the project is an investment and should be treated as such. Increasing the value of your investment should always be in the back of your mind, even if you have no plans to sell in the near future. The cash flow over the life of your investment all comes down to making some tweaks on the front end and in the way you deal with your investment on a day-to-day basis. While some things affecting the value of property come down to things out of individual control, such as market dynamics or political implications, there are some strategies that can be used to maximize the value out of your investment for years to come.
Add Market-Competitive Amenities
If you are in the business of leasing commercial property, per its definition, this is a place that another party is conducting business of some kind. If employees of a company are interacting with your asset on a regular basis, having amenities that make their workday less painful as part of the building can be a major selling point and drive higher rents. Building amenities such as a game-lounge, a fitness studio, yoga room, coffee bar, or even regular mobile car wash stations can be a differentiator when it comes to commanding higher rents than the competition. WeWork, which manages over 10,000,000 square feet and is valued at over $47 billion dollars according to Reuters, prides itself on being a Landlord that supplies amenities, including occasional activities, to the tenants. These amenities help create a sense of place within a workplace so instead of feeling like an employee is just going to work every day, they feel like they are a part of something. As companies compete for millennials within the workforce, which according to Pew Research is already the largest generation within the workforce, company culture is at a premium and amenities within a building help create culture.
Reposition Buildings Through Exterior & Interior Building Upgrades
Many of these tips can drive the value of a building, but ultimately if a building appears dated or dilapidated, tenants will not be drawn to it and it will not command higher rents than its peers will. Making upgrades such as improving lobbies, upgrading to LED lighting, changing fixtures in restrooms, and creating new façades on a worn out building can be the lipstick and curb appeal that may make a major difference in your rental value.
Go Green! Become LEED Certified
LEED Certification (Leadership in Energy and Environmental Design) is a widely recognized process of certification for buildings relating to design enhancements that make a building more sustainable. While the level of certification may increase the cost of a building based on design elements, having some LEED certified measures can help improve the marketability of a building as tenants know that the building will reduce footprint on environment and ultimately, will reduce the operating expenses of a building, which cost will pass on to the tenants. Energy efficiencies can help reduce utility costs across the board and in some cases results in longer lasting systems that will create easier maintenance to an asset.
Provide Luxury Building Maintenance and Service
Having the right team managing a building is important. Having building technicians that are trained on every aspect of the building and accessible 24/7 can be not only a selling point for new tenants but can help your operating costs as well. Highly seasoned building engineers will make fewer mistakes when it comes to deciding to replace certain functions and can put in place a system of preventative maintenance to make sure major repairs are not needed on the front end. While smart maintenance is important, the way that your technicians interact with tenants is even more meaningful. Ultimately, if leasing an asset to another party, commercial real estate leasing is a service industry. Providing top-notch customer interactions will create relationships with tenants that can make a major difference when it is time to renew a lease or deal with negotiating an expansion or contraction.
Building Relationships with Top Notch Brokers
Brokers are the lifeblood of commercial real estate transactions. It is rare that a high credit, major tenant does not have someone on their end of the negotiation, typically a real estate broker, to protect their interest. Building strong relationships with these brokers can help drive deals to your buildings. There are steps you can take to keep the broker happy, such as paying commissions on time and keeping them involved in the negotiation process. Word of mouth goes a long way in a relationship-driven industry like commercial real estate, and brokers can help spread your message to the right people.
Develop Lifestyle Destinations that become a one-stop shop
Location is the driver of real estate value and has been since the beginning of time. As more cities grow, it is not always necessary to be in the central business district to have a valuable piece of property. Assets can flourish in suburban markets as well, as long as positioned correctly. Assets in areas that have outside amenities such as access to coffee shops, boutiques, malls, gyms, sporting venues and other entertainment options can help increase your property value as people flock to those lifestyle destinations, lending themselves to be great places to operate a business as well.
Perform BOMA Evaluations
BOMA (Building Owners and Managers Association) evaluations are sets of professionally agreed upon evaluations for building metrics and are widely respected and known across the industry. If you are dealing with intelligent or experienced tenants, they will have some peace of mind knowing that your building abides by BOMA evaluations, especially when it comes to things like architectural square footage measurements, core factors, and load factors. This is a check mark that many tenants will want to check when they decide on where to locate and one that can make or break your negotiations.
Develop A Marketing Plan To Attract Members
Marketing is half of the battle when it comes to commercial real estate. If tenants do not know that your building exists and what it has inside of it, they will not consider your property, much less paying premium rents. Develop a prestige-marketing plan to attract tenants that will create a predictable flow of income. A strong marketing plan can help a building thrive in good markets and prepare to stay occupied even in the bad markets, as assets with less marketing will be forgotten.
While all these tips are surefire to increase the appeal and thus the value of a property, ultimately it comes down to the way a property is managed day in and day out. While implementing any of these strategies can be done as an individual or group, employing a high-quality property management firm like The Kelemen Company can expedite the process.