Smart Repositioning Strategies For Your Commercial Real Estate With The Best Return on Investment
Real estate investors continuously look for fresh roads to diversifying their own asset portfolios. And this post is written to update you, the realty investor, about the smart repositioning strategies. First, let us read the insights shared by an expert on this topic.
Strategies coming from an expert
We sought for the nuggets of wisdom shared by experts in the sector, and here is what interested us. Richard Brennan, a partner and an architect at the multifaceted design practices, HLW International, says, “By expanding traditional ideas about rehabilitating and retrofitting commercial properties to include building use, it is possible to create value where previously there wasn’t any.” He, further, quipped, “Would you go to a doctor for a facelift when what you really needed was major surgery?”
The mention of retrofitting and rehabilitating led us to exploring some trends that dominate the real estate landscape in the past decade.
The trends in the past ten years
The key question to ask is that how a parcel of property will target a specific tenant base. To this, Brennan cautions the investors about the ever-changing economic factors and the mercurial real estate markets.
The last decade saw excessive changes in realty markets of the U.S.; by studying the trends that came in the past ten years, we noticed that an older establishment should accommodate the uses that vary from its original design intent. And location is the consistent determinant among these trends.
Apart from the location, structural modification is important no matter the number of upgrades and renovations a property needs. If a building’s structural modification happens correctly, the property attracts different tenants and its market expands. So structural modifications make an aging establishment more competitive within a business district and allow owners to market it, despite its awkward floor plate, to alternative tenant types.
The variables that influence a property’s upgrade
Different variables come into play while upgrading a commercial property. (During repositioning of their properties, many investors/landlords seek the financial assistance of commercial mortgage lenders.) These variables include technical feasibility, program demand and the ROI for owning vs. leasing. But once the property is upgraded, it becomes secured financially by attracting different tenant profiles.
Pinpointing the variables is a challenging task altogether. On this, Pat Hauserman at Tishman Construction stated that property assessment must be done from an owner or investor’s perspective. He explained: “We ask questions, such as whether the asset is performing at market rate, what is its potential, and how can it be improved to increase financial performance. Similarly, is the asset a ‘hold’ or ‘invest for resale’ type asset? Has the rental income been maximized? How little can be invested to get the best return?” The answers to all such questions inform investors/owners about which construction and design approach may realize a real estate asset’s highest potential value.
As per Newmark Grubb Knight Frank (NGKF), a leading commercial real estate advisory firm, the average age of a building in New York is nearly 82 years. However, the age varies from one borough of New York to another. “It varies, of course, from neighborhood to neighborhood, but with repositioning investments of $100-$250 per square foot, annual rental increases of $10-$20 per square foot are common,” says Dennis M. Karr, the managing director in NGKF’s New York office. He adds, “These numbers are even greater for emerging neighborhoods and for what we call the ‘wow factor buildings.’” Similar statistics may be identified for all central business districts and the newly recycled neighborhoods across the U.S.
The insider’s tip on investing in the right remolding project
Successful development properties focus on designing and building to meet all the needs of a group of tenants. HLW’s Jennifer Brayer, who is designing, upgrading and renovating a huge tract of space for JPMorgan Chase in Manhattan, advises: “For example, HLW knows Class A office space inside and out, from the amenities and high-end finishes to the floor plans appropriate for financial and corporate tenants with sophisticated space and technology requirements. However, it is just as important to understand how the key business drivers for a proposed user of a space can line-up with design objectives. In fact, it is critical to understand this prior to investing in the retrofitting of an existing property.”
So that is it, property investors. We have just given you crucial industrial insights into all the smart repositioning strategies to implement while developing real estate. In case you seek commercial mortgage bridge loan to execute the repositioning project, consult with Park West Capital for your financing needs. This commercial mortgage lender offers other products, such as no-income verification financing, for letting your real estate repositioning efforts see the light of day in a hassle free and streamline manner.