As we move into 2023 and the commercial real estate market continues to grow and evolve, those who have invested in commercial real estate are looking closer at ways to maximize their investment in commercial buildings, spaces, and properties. While the initial cost of commercial real estate can be lofty, the real bottom line comes down to the return on investment (ROI) that owners see on those commercial properties over time.
As with any investment, the ultimate goal is to make the most of the money spent, so how can you as a commercial real estate property owner leverage your investment to maximize your return on investment? In this blog, we’re looking at five considerations:
1. Location, Location, Location:
One of the most important factors in maximizing ROI is choosing the right location for your commercial property. After all, if your property is located somewhere that businesses don’t want to operate, there will be little to no demand for your space. In a situation like that, your best option may be to sell the property rather than to shoulder the responsibilities and expenses of property management potentially at a loss.
Generally, you’ll want to look for areas with high foot traffic, easy access to major transportation, and a growing population. This will increase the chances of finding high-quality tenants and achieving a high rental income.
2. Conduct Market Research:
As should be the case before making any investment, it is essential to conduct in-depth market research. This process will help you identify the current trends and future prospects in the commercial real estate market, and make informed decisions about where and how to invest.
This can mean understanding the latest trends in technology and equipping your property accordingly, keeping a finger on the pulse of what people are looking for in commercial spaces, looking toward the potential future needs of your customers, and more! When you can meet and exceed the expectations of your target market, you can justify a higher price point and therefore increase your ROI.
3. Invest in Improvements:
When investing in commercial property, it’s important to consider the potential for property improvements and renovations. This can include things like remodeling, adding new features, and making the space more energy-efficient. These improvements can increase the value of the property and make it more attractive to potential tenants.
By strategically investing in updates, upgrades, and renovations, your property can go from being a cheaper option on the market to fetching a high price on the commercial real estate market simply by planning and implementing high-value improvements.
4. Consider Multiple Tenants:
Another way to maximize ROI is to consider properties that have the potential to attract multiple tenants. This can include multi-tenant buildings, retail centers, and office buildings. When you have more spaces or parts of your commercial space that are available for rent, you immediately increase the income potential on that property. Increased income potential over the same operational costs results in an instantaneous jump in the ROI for your listing.
5. Diversify Your Portfolio:
Diversifying your portfolio can reduce risk and increase the chances of achieving a high ROI. Consider investing in different types of commercial properties, such as apartments, office buildings, and retail centers. This will help to distribute the risk associated with property ownership and increase the chances of finding tenants for your property.
Make the Most of Your Investment
Overall, the key to maximizing your ROI when investing in commercial real estate is staying informed. When you understand the market, you are able to make informed decisions based on thorough research and careful consideration rather than guessing what might pay off in the long term. By following these five strategies, you can increase the chances of finding high-quality tenants, improving your commercial properties, and ultimately making the most of your investment into commercial real estate.