When you’re looking to boost the value of your commercial property investment, there are four main ways you can approach it.
The first involves improvement of the investment property itself. The second relies on increasing its returns. The third involves adding amenities, and the fourth is when you change your property’s usage.
While commercial property is generally seen as a longer term investment than residential property, industrial and retail premises can often be snapped up and flipped by canny investors who see the potential for adding value.
Whether you intend to hang on to the property in the long or short term, it pays to maximise its value in as many ways as you can.
Let’s look into the four ways of increasing a commercial property’s value in more detail.
1. Improve the property
If you’re buying a property, consider unattractive, run-down premises often overlooked by other buyers.
If it has a short lease, the existing tenants can stay while you renovate. Then you renegotiate the improved property on a longer lease with higher rent.
If you’ve owned your property for a while, you can still renovate and increase its sale value. Minor renovations include improvement of heating and cooling systems, floor coverings, paintwork and landscaping.
Structural improvements are obviously costly and more disruptive for your tenants, but have the potential to greatly increase the value and appeal of your premises.
If you offer a fresh, contemporary and flexible business or industrial space, you are likely to appeal to better quality tenants and be in a position to negotiate a favourable lease.
2. Boost your property returns
You need to know equivalent market rentals for your type of property before you can increase the rent.
Rent may already be lagging behind and ready for an increase. Otherwise, factor in the value of renovations into a new, higher rental figure.
Remember, you want your rent to be competitive – if you go too high, you price yourself out of the market.
When buying a commercial real estate investment, consider looking for properties with an obviously low rent. This means you get an instant boost in property value by simply bringing it into line with current market rents.
3. Add amenities to the property
There are all sorts of ways to improve the amenity of your commercial investment.
Look for digital ways to enhance your property, such as offering free Wi-Fi to retail tenants or installing a digital security system.
Add a small playground, seating and courtyard to a group of retail units, or even something like a childcare centre in larger developments.
4. Change the property’s usage
Wise commercial investors are always on the lookout for rezoning opportunities.
If you possess a shabby warehouse in a chic area, you have the perfect opportunity to turn it into a fashionable restaurant, shop or office. This will give an instant lift in value.
Finding it hard to find tenants for your multi-units? Try changing the tenancy mix, creating a more appealing business balance in the area.
Improved cash flow and higher occupancy rate can make a big difference to your bottom line, also increasing the market value of your commercial property.
Finally, remember that specialist property consultants can take the hard work out of finding, managing and improving your commercial investment.