Find Value in Existing Properties
For industrial property owners, even the smallest increase in rental rates can make a vast difference in the profitability of the property when large spaces are being leased. Smart landlords take advantage of simple improvements that will help them obtain higher rental rates, reduce vacancies and lease properties faster.
We have seen the following cosmetic improvements work time and again to help industrial properties show well and deliver increased profit to the owner.
Exterior Upgrades
Building Structure – Rusty water marks streaking down the side of a white building or chipped paint in a color that was chosen 20 years ago do nothing to help your prospective tenant envision their business being run there.
Putting a little time or money in your building’s appearance will bring value far beyond your investment.
Pressure Wash – Some buildings may simply need to strip off the years of industrial grime that have accumulated on the exterior walls. Make sure you hire a professional company that specializes in commercial cleaning, as you’ll want to ensure the methods used are appropriate for your building’s structural material and dirt you are attempting to remove.
Paint – Consider painting your building a fresh, but neutral color; however, steer clear of making bold color choices for your future tenant, as their preferences might be entirely different from yours.
Stucco – A stucco overlay may involve a bit more cost upfront, but the upgrade in appearance and potential rental rates, may be well worth the effort. Stucco overlays are especially helpful for use on metal buildings that are showing signs of aging.
Parking Lot – A simple seal coat or restriping of the parking lot can vastly change the appearance of the exterior. Additionally, if there are large potholes and cracks, address those in the appropriate manner to ensure safety and proficiency for your property.
Landscaping – This normally involves a basic cleanup of the landscaping. Remove piled leaves and debris, refresh mulch or rock, replace dead plants or trees, trim back overgrowth, etc. If extensive maintenance is required, we recommend xeriscaping because of the significant savings that can be obtained over the long term from water and maintenance reductions.
Interior Upgrades
Office Areas – Outfit your office spaces with new paint and new carpet for a quick, fresh look. Because these spaces tend to be smaller in industrial properties, this remodel can deliver a big bang for your buck.
Warehouse/Production Areas – Yes, the warehouse space is meant to get dirty and be dirty. But that doesn’t mean you shouldn’t put some effort into cleaning up the warehouse as much as possible. Remove oil stains, tape and sticky residue and replace damaged insulation.
Lighting Upgrades – Upgrading to more efficient fixtures is a great selling point on two fronts. It will save your tenant on monthly electric bills, but it will also allow your property to show better. Dimly lit spaces always look worse and evoke a sense of poor building maintenance.
Declutter – Many people are unable to visualize a space beyond what’s in front of them. Make it easy for your potential tenants to do so. Declutter corners, offices, even storage spaces. The less junk that is visible, the more likely your tenant will be to mentally fill that space with their own equipment and materials, seeing your property as a great space for their needs.
Scenario Breakdown
The following scenario shows the financial gains possible by making these improvements:
Property A – No Upgrades
Size: 10,000 SF
Comparison Time-frame: 5 years
Time to Lease: 18 months
Rental Rate Obtained: $8.00, NNN
Improvement Costs: none
Total Revenue: $280,000
Property B – Upgrades
Size: 10,000 SF
Comparison Time-frame: 5 years
Time to Lease: 6 months
Rental Rate Obtained: $9.75, NNN
Improvement Costs: -$26,000 (Stucco overlay, front only – 15k, carpet and paint in office – 6k, warehouse lighting upgrade – 5k)
Revenue: $438,750
Total Revenue (minus improvements): $412,750
Net Gain of Property B over Property A: $132,750
As seen, the net gains far outweigh the initial investment costs. And when you factor in the tenant satisfaction, and consequent lease renewal, the gains can be even greater.
At Peak Commercial Properties, we see our work with you as a partnership. We want you to succeed and profit as much as possible. That’s why we always search for opportunities to help you decrease expenses, increase efficiency and ultimately increase your profits.