How To Reposition Your Office Building For A Higher Return
Investing in commercial real estate as a vehicle to earn income is not a new idea. Most of us know of someone who has invested in real estate and has "struck it rich."
You can invest in multifamily, retail, industrial, land, office space and more, but I'm particularly interested in the office sector. And although the idea of investing isn't new, there is a variety of new ways for owners to reposition their buildings to create more value.
First impressions mean everything, especially in real estate. Remember, we're trying to court tenants to sign a lease in our building. Additionally, we're trying to keep our existing tenants happy so they continue to lease from us. If a tenant drives up to your building and the sidewalks are cracked and the parking lot has potholes and the trees are dying, you better believe they'll consider going elsewhere.
Rather, if you keep up your maintenance and invest in updated exterior signage, they'll be more willing to walk inside to see what you have to offer. These costs can be returned many times over based on extrinsic value tenants will place on a building that's in good shape.
Now that we've gotten past the exterior, let's focus on what's inside. Many suburban office buildings are nearing 30 years old, as much of the stock was built in the mid-to-late 1980s. The lobbies are old and tired and are in need of a major facelift.
If you haven't renovated yet, you should consider new, modern furniture, energy-efficient lighting, new paint, etc. Don't have a full cafeteria? Consider outsourcing the task to one of a wide variety of grab-and-go food vendors you can work with to provide options. Still have that old tenant directory? Toss it and upgrade to something like a touchscreen that not only tells you the tenant roster but also shows people the local amenities. Here's another cheap idea: Wi-Fi. Employees like flexible work solutions, so give them the opportunity to work outside of the office.
Speaking of amenities, it's common now for most tenants (especially the big ones) to expect fitness centers and shared conference rooms. The upfront expense might seem like a heavy lift, but you'll lease space faster, keep it leased longer and yield higher net rents. If you're in a city, you can have fun thinking up all kinds of cool amenities.
For suburban owners, the options may be somewhat limited but you should still consider new and exciting features to help attract and retain tenants. And they don't have to be over-the-top amenities: They could be small additions that have a big impact like a tenant lounge or a coffee bar or even an onsite tech guru to fix all of those aching tech issues. Do your tenants live nearby? Install a secure bike rack. It's a healthy alternative to driving — and as a bonus, it will free up some of your parking.
Keep in mind that most people spend a third of their adult lives working in an office setting. For the first time, companies are spending more of their own time and resources figuring out how to create the best and most healthy work environment for their people. The landlords who are focused on these trends will absolutely be in the best position to win more business and to add tremendous value to their buildings.
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