3 Ways to Maintain the Value of Your Commercial Property
With yearly returns falling between 6-12% of purchase price, commercial property is one of the best investments available today.
An investment that profitable commands an extremely high time commitment. Moreover, if you own multiple properties, the time it takes to maintain all of those properties is all but impossible for one person to handle alone. At best, it’s like adding an additional full-time job to your current list of time commitments. At worst, it will completely overrun your life.
What’s worse, the less time you spend managing your investment, the less money it will make. What’s an investor to do? To help you out, we’ve put together some of the best and most time-effective ways to maintain the value of your commercial property.
1: Keep Your Tenants Happy
Tenants are the single most important aspect of your commercial property investment. A property without tenants is always doomed to lose money. It stands to reason, then, that keeping your tenants happy is the first step towards a successful investment.
In fact, losing even a single tenant shakes the foundation of your investment for years. An industry insider published a research study that indicates it can take up to two years to recoup the money deficit caused by losing just 1 commercial tenant. Keep a tenant happy, however, and they’re 3 times as likely to renew their lease, according to another study performed by Kingsley Associates.
If you’re looking for ways to keep tenants happy, here are a few tips:
Keep the Building Safe
When it comes to tenant satisfaction, safety should be your first priority.
Keeping a building safe involves some obvious things, like installing security cameras and making sure to conduct maintenance audits monthly. It also includes some smaller things that are easier to forget about (but go a long way), like eliminating tripping hazards and making sure the property is well-lit at night for added security.
When you prioritize safety in your property, your tenants will feel secure when they are there. This in turn will make them feel secure when doing business with you, which will lead to happier tenants and more renewed leases.
Know and Communicate With Your Tenants
People do business with people they like. So, if you know your clients and they like you, the rest should be easy.
This doesn’t mean you have to be friends with all your tenants. In fact, you may come off as unprofessional if you tried to befriend them. It does mean, however, that you should remain professional and respectful at all times. Since your tenants likely operate out of your property as a business, your relationship with them should be formal and businesslike. Treat them like the important client that they are and you’re well on your way.
Another thing you should do is keep communication channels with your tenants open. If tenants always know that they can get a hold of you when something goes wrong, they will be more confident doing business with you. You can also gather valuable feedback by periodically sending clients surveys to get feedback on what they’re satisfied with and what they aren’t. Surveys have the added benefit of making your tenants feel valued.
Keep It Clean
Nothing will ruin someone’s opinion of a property faster than filth and clutter. Your property is likely the face of your tenants’ businesses. If it’s messy and poorly maintained, their clients will become dissatisfied, which will ultimately fall back on you.
Keeping a property clean can be frustrating; it’s one of those things that people take for granted. Nobody will come running with compliments on your squeaky-clean windows, but you’ll definitely get complaints if those windows are streaky.
Investing in a maid or janitorial service ensures that your building is always clean. Plus, it’ll save a lot of headaches down the road.
2: Maintain and Upgrade Your Property
Commercial property maintenance involves more than just vacuuming floors and wiping down windows. In fact, there are hundreds of things that you must do to keep a building maintained: check the roof for leaks, ensure that all fire and emergency equipment is functional and up to code, keep the air intake clean, and much more. Even if you do know how to do these things (and most people don’t), you have to be licensed and insured to perform these services on a commercial property.
Given that, investors almost always either hire an in-house property manager or hire a company like Neyer to take care of that for them. Property maintenance is important for the same reason cleaning is: if your building is maintained, your tenants are happy. If it isn’t, things will go wrong with their business, they’ll blame you, and they’ll eventually leave. When your tenants are unhappy, you lose money.
If you upgrade your property on top of maintaining it, however, you can actually grow its value. By spending money on building renovations or new technology (such as a better security system or a more energy-efficient HVAC system), you add value to your property. This in turn will allow you to justify increased rent prices, and it also increases the retail value of the property should you choose to sell.
When considering property improvements, cosmetics are especially important. A commercial property’s value has much to do with the amount of foot traffic it gets during any given time. Therefore, any improvements (like a new landscape array or a freshly paved sidewalk) that increase your building’s curb appeal also increase its value.
3: Invest in Efficiency
Making your building more green both maintains and increases its value. The gold standard for green buildings today comes from LEED certification. LEED stands for “Leadership in Energy and Environmental Design.” Buildings that are LEED certified demonstrate more environmental consciousness and energy efficiency than normal buildings.
There are many reasons to consider LEED certification. By expressing a commitment to the environment, you make your property better for current tenants and more attractive to future ones. That’s because people prefer doing business with corporations that prioritize environmental-friendliness. In fact, LEED-certified properties boast 20% higher occupation rates than their non-LEED counterparts. Consumers are even willing to pay more money for the same service when that service is associated with environmental preservation.
The benefits don’t stop there, either. A building that is LEED certified is, by nature, more efficient. That means less money spend on water and electric bills. Even if your tenants signed a triple-net lease where they cover all the utility bills, you’ll still end up with happier tenants. Additionally, tax rebates are available for green buildings.
The best part? Any building can become LEED certified. While there are tiers of LEED certification (the top tiers are reserved for buildings that were built with the certification in mind from the start), any building that takes steps towards efficiency is a candidate for certification. Neyer has a history of success in managing LEED certified buildings, and can advise you on how to make your building more efficient.
Let Neyer Do the Heavy Lifting
By following these steps, you’ll be well on your way to keeping your tenants happy and preserving your commercial real estate investment. If you find that you need some extra help to keep everything in order, consider Neyer Management. We are the largest property and facility management firm in the region, with over 23 million square feet managed.
We currently manager over 210 buildings in the area, and we would be glad to add yours to the list. Give us a call or email today and we will tell you about the next steps you can take.