Commercial Property Book
- Thread starter Buzz
- Start date
Commercial Property Enhancements
Dear Buzz,
Will try and break down your question.
1) Enhancing for Commercial property
Commercial property is a unique animal as opposed to residential with regards to enhancements and improvements.
For a large part of commercial property, enhancements are simply not done "off the bat" in between tenancies or to enhance the property to increase the rent prior to tenancy.
The reason for this threefold:
a) Tenant pays for it themselves
Generally the tenant will at their expense upgrade a facility so that they can effectively operate their business there. This is ideal for the landlord as most upgrades cannot easily be taken with a tenant and are an effective free upgrade of the facility. In my last warehouse I installed security bars on all the lower story windows and also a ram-bar over the roller door. Try taking something welded on with you when you move premises.....
b) Differing Requirements
What one tenant finds useful can often be completely different to another. An example is an internal loading crane. Whilst this could be good for a metal fabrication shop needing to move around heavy items it can in fact be a hinderance. It would decrease the value of having a high roof in a warehouse because you would not be able to use so much high racking in order to maximise storage space.
Importantly by investing money into an item you could be limiting your potential market. (There are only so many eg metal fabrication businesses looking for a warehouse in area X at any one time.) Appealing only to a niche market could greatly increase your vacancy factor and thereby decrease the value of your commercial asset.
c) Fit outs
In times of greater competition and supply in the area it may be necessary to give a free fitout to the potential commercial tenant. As all tenants needs are different you could be spending money twice. Instead by finding out what appeals to them and what they need you would be able to negotiate a satisfactory and profitable lease agreement for yourself whilst at the same time limiting your cost.
Depending on what type of commercial property you are looking at the following book I have found on the Property Council's of Australia's site may give you ideas. (Note I have not read this book.)
What Office Tenants Want
Author: Urban Land Institute (ULI), USA and Building Owners and Managers Association (BOMA), USA
Date: 1999
Length: 102 pages
Type: A4 paperback
ISBN: 0-87420-866-1
Member Price: $143
List Price: $176
Stay ahead of your competition by knowing which building features, amenities and services will keep your target tenant market. Based on a comprehensive nationwide survey of office tenants conducted jointly by ULI and BOMA, this book will give you the facts on the features that are essential - and those that are insignificant - to different types of tenants.
Coverage includes 'smart' building and technologically advanced systems, the use non-traditional work practices, environmentally friendly buildings and materials, interior and exterior building features, common areas, amenities and building management services.
2) Buying & Renting out Commercial Property
Would suggest firstly with buying that you read Paul Zags excellent post on commercial due diligence.
http://www.somersoft.com/forums/showthread.php?s=&threadid=514&highlight=commercial+property
With regards to further information commercial property is a broad area in itself. However again would suggest that you check out the online bookshop on the Property Council of Australia to find what you are looking for, additionally I would expect that actually joining the PCA would be worthwhile if you were serious about commercial property.
http://www.propertyoz.com.au/data/bookshop/fs_shop.htm
Cheers,
Sunstone.
Dear Buzz,
Will try and break down your question.
1) Enhancing for Commercial property
Commercial property is a unique animal as opposed to residential with regards to enhancements and improvements.
For a large part of commercial property, enhancements are simply not done "off the bat" in between tenancies or to enhance the property to increase the rent prior to tenancy.
The reason for this threefold:
a) Tenant pays for it themselves
Generally the tenant will at their expense upgrade a facility so that they can effectively operate their business there. This is ideal for the landlord as most upgrades cannot easily be taken with a tenant and are an effective free upgrade of the facility. In my last warehouse I installed security bars on all the lower story windows and also a ram-bar over the roller door. Try taking something welded on with you when you move premises.....
b) Differing Requirements
What one tenant finds useful can often be completely different to another. An example is an internal loading crane. Whilst this could be good for a metal fabrication shop needing to move around heavy items it can in fact be a hinderance. It would decrease the value of having a high roof in a warehouse because you would not be able to use so much high racking in order to maximise storage space.
Importantly by investing money into an item you could be limiting your potential market. (There are only so many eg metal fabrication businesses looking for a warehouse in area X at any one time.) Appealing only to a niche market could greatly increase your vacancy factor and thereby decrease the value of your commercial asset.
c) Fit outs
In times of greater competition and supply in the area it may be necessary to give a free fitout to the potential commercial tenant. As all tenants needs are different you could be spending money twice. Instead by finding out what appeals to them and what they need you would be able to negotiate a satisfactory and profitable lease agreement for yourself whilst at the same time limiting your cost.
Depending on what type of commercial property you are looking at the following book I have found on the Property Council's of Australia's site may give you ideas. (Note I have not read this book.)
What Office Tenants Want
Author: Urban Land Institute (ULI), USA and Building Owners and Managers Association (BOMA), USA
Date: 1999
Length: 102 pages
Type: A4 paperback
ISBN: 0-87420-866-1
Member Price: $143
List Price: $176
Stay ahead of your competition by knowing which building features, amenities and services will keep your target tenant market. Based on a comprehensive nationwide survey of office tenants conducted jointly by ULI and BOMA, this book will give you the facts on the features that are essential - and those that are insignificant - to different types of tenants.
Coverage includes 'smart' building and technologically advanced systems, the use non-traditional work practices, environmentally friendly buildings and materials, interior and exterior building features, common areas, amenities and building management services.
2) Buying & Renting out Commercial Property
Would suggest firstly with buying that you read Paul Zags excellent post on commercial due diligence.
http://www.somersoft.com/forums/showthread.php?s=&threadid=514&highlight=commercial+property
With regards to further information commercial property is a broad area in itself. However again would suggest that you check out the online bookshop on the Property Council of Australia to find what you are looking for, additionally I would expect that actually joining the PCA would be worthwhile if you were serious about commercial property.
http://www.propertyoz.com.au/data/bookshop/fs_shop.htm
Cheers,
Sunstone.
