Commercial improvements can increase its value
Inner beauty is an important attribute if you’re a person. But when it comes to commercial buildings, what’s inside may count for very little if people – namely, prospective buyers and tenants – can’t get past the exterior. However, like people, commercial properties can appear to be drastically improved and often younger after a well-done makeover.
You’ll notice I said “well-done.” Slapping a fresh coat of paint on a building won’t do much to enhance its value if the property has shabby landscaping, shattered signage and a trash-covered parking lot. However, through renovation, marketing and management, it’s possible to restore a property’s reputation and value.
Start with Maintenance
Early in my career in Southwest Florida, I had an assignment to turn around the identity of a well known shopping plaza on U.S. 41 in Fort Myers. At the time, the multi-tenant retail center was quite rundown and had a reputation for attracting poor-quality tenants.
Our initial goal was to make the place look pristine. So immediately, we doubled the maintenance budget and had people picking up cigarette butts and other trash throughout the day. A maintenance person practically lived on site during regular business hours, which helped discourage loiterers and derelicts.
Before long, the plaza looked like the place to be as opposed to a place to avoid. Besides cleaning up the surroundings, we resealed and striped the parking lot, and completely re-landscaped the common areas. We also made the buildings more visible from the street by adding brightly colored awnings above the windows. Once the facelift was completed, we maintained the property to the highest level. As a result, we were able to attract new and better tenants, and raise the rents, as well.
The Bottom Line: First impressions are everything, so if you own an aging, commercial property, invest in enhancing the most visible areas (i.e., the exterior). These could include anything from fresh landscaping to a redesigned building entrance to new/additional signage.
Accentuate the Positive
It’s usually a big mistake to attempt to make an older property look brand new. It won’t work! Your time and money will be better spent trying to make it look its best.
Another shopping/antique center on a South Fort Myers corner on McGregor Boulevard, exemplifies this thought. First developed in the early 1960s, the center was looking pretty long in the tooth by the mid-1990s. In fact, by the time the Cape Coral Bridge overpass opened, the center looked more like a troll under the bridge! With an occupancy rate of about 20 percent, the place looked almost abandoned.
To raze or renovate was the big question. Although razing might have been the easier choice, the cost to redevelop the site would have been substantial. Instead, the owners opted to increase the economic life of the center through renovation.
Because the center comprised buildings from the 1960s and ’70s, it didn’t make sense to try to make them look new. Instead, we worked to make the center conform to the surrounding area that consisted primarily of established neighborhoods. Further, we upped the maintenance significantly, striving to make the property as pristine as possible (and keep it that way).
If you don’t spend a king’s ransom on renovations, you don’t have to raise the rents as much. At this particular center we kept the rents low and made them all triple net. Not only did this help the tenants grow their businesses, it kept the turnover low. (Actually, some tenants have been there for more than 20 years!)
Thanks to ongoing maintenance and vigilant management, the center went from 80 percent vacant to 100% occupied, and has doubled in value in the last few years. This quaint and charming piece of local history is now home to a high quality mix of tenants, including boutiques, antique shops and professional offices.
The Bottom Line: Maximize your property’s unique qualities by making improvements that complement the homes and businesses around it. Also, conduct routine inspections to identify problem areas before they become major eyesores and pose even greater problems.
Change Tenant Mix
Currently, I’m in the process of transforming a single tenant medical office building into multi-tenant general office space. The challenge to reposition the property has been compounded by the fact that this is a landmark structure on College Parkway.
On the other hand, the property’s location along a prime, commercial corridor makes it a logical choice for financial users seeking a signature building on College Parkway. After talking to a number of community banks, we were able to sign one as the anchor tenant on the building’s ground floor.
In addition to looking for an anchor tenant, we searched for general office users wanting space in a building that offered an identity. Furthermore, we condominiumized the building, enabling tenants to either buy or lease their space. Since then, a medical billing company and sports medicine/rehab business have also signed on as tenants, leaving room for just two additional users.
The Bottom Line: Even if you’re targeting new or different users, it’s generally best to stick with the same type of space. For example, it probably wouldn’t be feasible to transform office space into a restaurant. However, it would be reasonable to change medical office to general office or to upgrade a retail center from Class C to Class B.
The process of changing the public’s perception of a building is rarely easy, usually costly and always risky. Ultimately, the market will determine a property’s highest and best use, which in some cases, may mean starting from scratch.
Gary Tasman is executive director of Cushman & Wakefield’s Southwest Florida office. For more information, please contact him at (239) 489-3600 or gary.tasman@cushwake.com