Owning an office space means having a valuable asset you can either cash out on or turn into a passive revenue stream. However, the value of your office space is not set in stone. This means that by making some adjustments/improvements, you can quickly boost what it’s worth.
Now, the good thing about the purpose of this guide is that buyers and tenants are looking for the same thing. A potential buyer plans to rent out the place (or move in their business), which means they’ll look at it from the tenant’s perspective.
To simplify, how effective is your commercial property as an office space? This will be the question that will solve everything. With all of this in mind and without further ado, here’s how to increase the value of your office space before selling or renting it out.
Rising the price of rent
While this sounds morally dubious, it might be necessary. You will increase your monthly revenue by just increasing the rent cost. You will also increase the value of the place, seeing how the potential buyer will recognize that they will earn more from it.
Now, you need to provide at least some sort of justification for this rent increase. Otherwise, you risk driving away your current tenant. If you raise the cost by too much, you might not be able to find the next tenant as easily.
The cheapest way to do so is to follow the industry trend. If everyone is increasing their rent, so can you. This will be unpopular (although this move is always unpopular), but the tenant will understand it. Remember that you will probably only do so at the end of the lease.
You can also increase the profitability of your rent by reducing operating expenses. The potential buyer will have to move in or rent out the place. If you explain how their overhead will be lower, they will be willing to pay more.
Improve the property
Improving an office space for your team is vastly different from improving it to boost the resale price. So, you’re looking for improvements with a great ROI. You’re also looking for something aesthetic since it will help you sell the place sooner. Remember that time is money, and some actual costs are involved in selling. The longer it takes you to sell, the more you stand to lose.
Most importantly, you avoid upgrades that don’t add value to the place. Invisible improvements like a new HVAC unit or upgraded plumbing systems won’t get you what you want. Sure, they boost the quality of life, but they are something that the buyer will expect by default. As such, it will be hard to persuade them to pay more for the property.
Other projects, like going solar, are great for those who plan to stick around for years. Sadly, they’re less than perfect for those who want more rent money or a great deal while selling. Why? Because the costs of installation won’t pay off for a rental place.
So, what is a good upgrade? For example, installing a wood ceiling for your home is relatively inexpensive and can give your office space a luxurious look. Aside from the fact that wood is an excellent insulator and you’re reducing the overhead, it’s also a strong visual argument in your favor. This is just one example.
Repurpose smaller spaces
When renting out a commercial property of any kind, the potential tenant will look at the useful space they’re getting out of it. Sure, building another floor or expanding the building would be the simplest way to get more space (and more value), but this is too expensive. Not to mention that you might be doing this on the clock.
Instead, you can repurpose some of the smaller spaces on the office floor. Turn them into something useful and thematically fitting. Upgrading your storage room with more shelving (even overhead shelves) can significantly impact the property’s value. Remodeling your bathroom is another idea. Most importantly, you can always squeeze more value out of your hallways and reception areas.
The key is to recognize all these spaces that seem like dead weight and transform them into assets. There’s just no way about it. Just think for a second from the perspective of a buyer. What are they looking for, and what would they deem worth their money?
Break it down
Why not rent out two office spaces instead of one? Sure, you’ll get a smaller rent for each than before, but cumulatively, you’ll be in the net positive. By renting out each office space for just 60% of the original rent value, you’ll earn 20% more for the same rental property.
Most importantly, this further increases the resilience of your rental business. Namely, if one of the tenants decides to leave, you won’t be as desperate to look for a replacement. The chances of both office spaces being vacant simultaneously are pretty low. This is the potential that the potential buyer will notice as well. They will see the increased rent and business model resilience. Needless to say, this will make the property more appealing.
It’s also important to mention that this won’t always be possible. Still, this idea may be valid in more scenarios than you expect. Carefully consider it.
In the end, this is a method that never fails. You can always ask for more, and if you’re not too brash about it, there’s no downside to it, even if you don’t come to an agreement. The power of negotiation may allow you to get more value out of place without putting in any extra work.
Naturally, it all comes down to how good of a negotiator you are. The aptitude for negotiation displayed by the other party also counts for something. Picking up a book or a course on the subject matter is generally a good idea. Being a good negotiator is something you will benefit from throughout your life.
In the end, an office space (or any commercial property) is a valuable asset. If you already own one, you have many options for making it more valuable or profitable. In general, put yourself in the shoes of a potential tenant and think about what matters to them. Then, consider which of these things would be cost-effective for you. That’s really all there is.