2016 wasn’t a stellar year for the U.S. commercial property market. External trends, from disappointing growth in China to the United Kingdom’s shock decision to leave the European Union, probably dampened investor sentiment during the first three quarters of the year. So too did the emerging consensus among U.S.-based real estate observers that, hotspots aside, the U.S. commercial real estate sector has hit a near-term top.
In a challenging — if not dire — commercial real estate environment, what can property owners do to maximize their return on investment and squeeze more cash out of their holdings?
Why, what they always do when the going gets tough: turn over a new leaf.
These five projects can polish your commercial property to a bright shine that prospective lessees can’t help but notice. Though all require some upfront or ongoing investment, they’re likely to pay for themselves — and then some — on the back end.
1. Switch Out Old Lighting
Still getting by on incandescents and old-school fluorescents? Those are illegal some places, you know. They’re also really inefficient. Next weekend, spend a few hours (or pay your crew to do the same) changing out inefficient old lighting for spiffy new LEDs. Depending on your building’s size and tenant demand, you’ll save hundreds or thousands off your electricity bill next year.
2. Upgrade the Roof
How old is your building’s roof? Do you even know?
Maybe your roof’s age is on the property inspection report you commissioned before closing. But maybe not. And such reports are rough estimates at best, anyway. If your roof is showing its age in any discernable way — cracked tiles, missing shingles, peeling rubber, sagging depressions where water can pool — it’s time to rent a dumpster, rip the whole thing out, and install a new roof that you won’t have to worry about for years or decades. And don’t worry about the cost: a new roof is a time-tested resale value booster.
3. Invest in Better Broadband
Unless you’re a fiber geek, your property’s Internet connection is almost certainly behind the times. Business tenants (and, increasingly, residential gamers and streaming addicts) hate slow connection speeds. Research super-fast options in your area, like Google Fiber. If none are available, pay your cable or municipal utility the extra $30 to $50 per month for premium broadband.
4. Enhance the Lobby or Entryway
First impressions matter. Even if your building’s lobby or entryway lacks the space or bones to accommodate lingering guests, it can’t be actively unpleasant to hang around. Repaint, add comfortable seating and functional tables, throw out some magazines, mix in a potted plant or two, and do whatever you can to let in more natural light.
5. Add Cost-Effective Amenities
Sounds expensive, no? Just start slow, stay within budget, and make sure your additions actually add value. If your property is a multifamily residential structure, sketch in a cozy fitness facility with outside views. If it’s a midsized business center, add in a daycare facility (or earmark an empty suite for a daycare tenant). If it’s a mixed-use mid-rise, find a chef-driven restaurant or upscale coffee house. The sky’s the limit.
What are you doing to fix up your commercial property portfolio?