One of the interesting aspects of commercial real estate, when compared to residential real estate, is that it is relatively easy to increase its value. This means that commercial property owners have more control over creating value in their property than homeowners do. So what are some ways commercial property owners can raise the value of their property?
For starters, they can raise the rent. This is especially an option for those who charge less than the market average. A little research into comparable properties can give a good sense of what the rent per square foot should be. As leases expire, rents can be raised, which will increase the net operating income.
Another thing business owners can do is to lower their expenses. This can usually be done immediately. It could mean finding lower priced property insurance or maintenance services, or cleaning supplies. Any costs cut out will serve to increase net operating income.
Upgrading the property is another possibility. While this will cost money in the short term, it can bring in money in the long term by making the property more attractive to future tenants and allow for higher rents. It will also allow one to charge current tenants higher rents when their leases expire.
Changing the use of the property, in some cases, may be a possibility, particularly if the property has become obsolete for the use it was originally built for.
These are just some of the possibilities. In our next post, we’ll continue looking at this topic of how to raise the value of commercial property.
Source: Realty Biz News, “Ten Ways to Increase the Value of Commercial Real Estate,” Daniel Doran, August 15, 2012
