Real estate has always been touted as a reliable investment and one of the most popular ways to harness its potential is to acquire commercial property. Done right, owning commercial real estate promises great benefits, including but not limited to providing investors with a steady source of passive income.
However, passive income doesn’t mean waiting passively for the money to roll in. As an investor, you need to actively make sure that benefits continue to accrue and don’t peter out. While owning commercial real estate is a great idea, it also requires you to keep your property attractive and perceived to be of value to current and future tenants.
Here’s how to boost the value of your commercial real estate property:
The Value of Renovation
“I have the perfect piece of property, it’s in a great location, and I’m already earning a lot from it,” you may be thinking. “Is there really anything else I need to do to increase my commercial property’s value?”
The answer to that is fairly simple: commercial real estate renovation. Whether you have a building that offers commercial spaces to various businesses or a residential property with units for rent, undertaking a commercial space renovation project can keep your property looking fresh, modern, appealing, and up to code.
The question is: how extensive should your renovations be? While you may be correct in assuming that renovations allow you to raise the rent on units in your property, you need to do the math. Make sure you don’t price your property out of the reach of your intended market and that tenants see how your upgrades can positively impact their business or quality of life.
Experts say that instead of a total overhaul, you can focus renovations on the following:
- Major problems that directly affect the wellbeing of your tenants like a leaking or damaged roof, insufficient water supply, and so on.
- Improving curb appeal if your building starts showing signs of wear and tear.
- Upgrading high-traffic areas like entryways, hallways, corridors, and public restrooms.
- Energy efficiency.
- Items that will make you more money like installing and selling advertising signages.
Most of all, take good care of your property. It is certain to attract more tenants, which will help increase your rental income. At the same time, regular repair and maintenance will keep property values high, which will work to your advantage should you ultimately decide to sell your property down the line.
Upkeep and maintenance will also bolster the image of your property, making it more attractive to higher-quality and possibly higher-paying tenants, who in turn will enjoy a boost in their own brand and image by being associated with your property. All in all, it’s a win for everyone.
What To Consider When Upgrading Commercial Propeties
Before starting a commercial property remodeling project, you first need to figure out what areas need the most attention. You don’t want to waste time, money, and effort on unnecessary refurbishments. You can also have your tenants sound off on what improvements they would like to see and any problems that they’ve been encountering in their space.
Here are some key considerations to keep in mind to give you a general idea of what you can do for your commercial space renovation project. This is just to help you get started; we’ll dive into the specifics a little later on.
- Know what you want
This will help keep your renovations focused and your budget controlled. You don’t want to waste time and money because of last-minute additions and changes that were not a part of the original renovation plan.
- Enhance accessibility
Being mindful of different physical abilities will allow you to become more inclusive. People with mobility issues, or those who are Deaf, visually impaired, or otherwise disabled, often find themselves shut out of places that can’t accommodate their needs. Upgrading your building with properly graded ramps, spacious elevators with voice outputs, power-assisted doors, and the like improves physical access and comfort for everyone.
- Enhance security features
Everyone, including you, will enjoy greater peace of mind knowing that the property is protected from security breaches. Make it a point to upgrade the security system, ensure that alarms and cameras are working, adopt features such as security glass, and provide sufficient lighting in all public areas. Tenants and guests will notice your efforts and improve the reputation of your property.
- Prevent accidents
Prevent accidents by adding anti-slip flooring, repairing cracked tiles, making sure that stairwells and fire escape routes are accessible at all times, and adding clear signages about what people should do in the event of an emergency. Aside from keeping tenants and guests safe, these measures also ensure that you’re complying with government regulations.
- Prioritize sustainability
As much as possible, think of sustainable solutions during your commercial property remodeling project. Work with a contractor with a track record of using sustainable materials, technologies, and practices.
- Improve publicly available/common facilities
Look after the comfort of tenants and guests by improving common facilities such as restrooms and lobbies, and increasing public seating areas.
- Take note of zoning regulations
You want to be sure that your property is up to code and any new additions will be accepted and won’t result in fines.
- Plan building operations and tenant convenience ahead of renovations
As early as now, think about how the building, tenants, and guests can continue to operate once renovations are underway. If you need to undertake a major revamp, consider doing it in phases to mitigate the inconvenience it will cause. Figure out an acceptable schedule for all, listen to possible concerns, and make sure that tenants are given operable alternatives so their business can carry on as usual.
Improvements for Specific Types of Commercial Property
While there are fixes that apply to all, the following types of property require specific commercial real estate renovation work.
The point of an office renovation is to maximize productivity while making its occupants feel motivated and energized. While a Gallup poll in June 2022 found that only 2 in 10 people continued to work on site, hybrid arrangements have also become the norm. Thus, office design trends in 2023 see offices adapting to changing norms via flexible collaboration spaces that can accommodate groups of several sizes. Acoustic pods will block out noise and improve focus. And biophilic design will continue to hold sway with living walls, water features, and greater integration between office interiors and the natural world outside.
Renovating a multifamily building means wanting it to be effective and doable even with tenants present. Plan well so there will be as little disruption as possible in common areas. Inform tenants of construction work ahead of time and include start and end dates so people can adjust accordingly. Ensure safety, access, and provide assistance when necessary.
Industrial buildings and warehouses are renovated for various reasons, from the need to expand to accommodate bigger jobs to meeting building codes. Some key changes that can be made involve improving storage facilities, upgrading security systems, and providing additional space for heavy vehicles and equipment.
Improving shopping centers, strip malls, and other retail spaces can potentially boost the sales of tenants. Renovations can also lure shoppers back to brick-and-mortar stores. Accompanied by limited-time offers, live events, and other in-store experiences, a renovated retail store has the potential to attract – and retain – new customers.
If you own a shopping center, curb appeal is as important. You can update signages, improve landscaping and pathways, provide places to hang and relax, and enhance parking. Making such changes will improve user experience and result in repeat visits. Remember that customers are less inclined to visit a place that looks old and grubby.
As with any renovation, commercial space renovation requires you to understand what you – or in this case, your tenants – need, how the space is being used, and what current trends and features are applicable to your property.
A summary of prevailing market trends
Much of what tenants are looking for has stayed mostly consistent, such as a good location, ample parking, reliable nearby transportation options, the availability of high-speed Internet, and solid security, among others. With the pandemic, however, some priorities have been added to this list.
For example, people who are looking for housing in a multifamily building may prioritize affordability, but they would also want a place to accommodate different needs. A bonus room or space that can be turned into an office, for example. Or shared facilities such as a park or playground where residents can relax, work out, and spend time with friends and family.
When it comes to offices, tenants want to see configurable ones that can accommodate multiple uses. Also good: areas that can encourage collaboration and high-quality work experiences better than an open-floor plan can. Or huddle rooms and fewer private offices.
As for retail, tenants are looking for spaces that feel warm and encourage a sense of community. Green spaces and al fresco sections are important for restaurant or cafe owners.
Essentially, the key thing now is that cold, impersonal spaces are out; more community-oriented ones are in.
South Floida’s Commercial Real Estate Outlook In 2023
Like every other industry, the South Florida commercial real estate market was affected by the pandemic. Vacancy increased as a result of company closures or businesses moving their operations entirely online. Retail spaces were similarly hit.
However, 2022 saw the market bouncing back, and prevailing market conditions, such as a strong retail sector, business-friendly tax laws, and an influx of foreign investment, were positive developments for commercial properties.
Moreover, according to Law.com, South Florida continues to enjoy population growth, and that the presence of new-to-market tenants is driving up the demand for premium office space. IslanderNews.com reports that the office market in South Florida is experiencing exceptional growth as the area welcomes 800 people every day. Even industrial buildings are a target of the growing demand, with the industrial vacancy rate in South Florida reaching a new low of 2.2%.
Multifamily housing in South Florida is also enjoying growth, with the attractiveness of business prospects, the climate, and the low taxes attracting migrants from out of state. Overall, it looks like a good time to invest in commercial real estate in South Florida, and any dips in the market can simply be viewed as temporary and a part of its natural fluctuations.
For this reason, the South Florida commercial real estate market remains highly competitive. If you’re interested in exploring the availability of commercial real estate in South Florida, it’s imperative to have a seasoned team working with you.
We at the DeMarco Group have more than 12 years of experience assisting our clients in securing the best deals on all types of commercial properties, from shopping centers to office buildings to assisted living facilities to residential homes. Your needs are paramount, and to every transaction, we bring our in-depth market knowledge and experience. We understand that each transaction has its own set of asks, which is why we tailor our approach accordingly, and we are well versed in the ins and outs of commercial property transactions.
Call the DeMarco Group at 954.453.1000 or contact us here to learn more about developments in the South Florida commercial real estate market that you can be part of. Explore your commercial property options with us today!