Five Things To Consider Before Renovating Your Commercial Property
Posted: Aug 13, 2015
Occasional renovation of a commercial property is required to maintain the structural health of the building and premises. However, any renovation project needs to be appraised before being undertaken. Renovations are an investment with uncertain returns. That is the reason property managers need to consider certain things before getting a renovation project approved by the property owner.
1. Assess the return on investment
The first and foremost consideration should be the evaluation of the return on investment of a renovation project. It is vital to assess how much the renovation project will add to the rental and resale value of the property. After assessment, it might surface that the cost of renovation would surpass the increase in return. In such a situation, complete renovation is not a good idea and the budget must be retrofitted to maximize ROI.
2. Analyze the latent costs
While analyzing the cost of renovation, real estate management firms may forget to factor in potential costs that will arise as a result of the renovation such as projects that involve installation of services which invite running costs. For example, renovation of a service from being manual to power-driven would also invite recurring energy costs.
3. Hire the right project manager/contractor
The success of a renovation project depends on the contractor whom it is entrusted on. The real estate property management must conduct an in-depth review of contractors before selecting one. It is advisable to go through industry references and also cross-check all price quotes before making the right decision. A project manager will ensure that all renovations are on track and on schedule. Every added delay will only serve to drive up costs.
4. Ensure the relevance of renovations
Certain renovations may conflict with the brand image of a commercial property. Property managers must be well-aware of all the constituents of the property’s brand identity and should be careful enough not to disturb those elements through unnecessary renovation. On the other hand, certain renovations would significantly enhance the brand value of the property. Such renovations must be welcomed even at the cost of a slight nick in the budget.
5. Market evaluation
In some situations, property owners acquire an old property and decide to renovate it before inviting tenants. However, what they might miss out is the importance of market evaluation and assessment of the location. Research by real estate services might reveal that the location of the property is a hindrance to its value and renovation will have little or no impact on the value.
I am John Daniel, A US based Real Estate Professional and Blogger. With experience in real estate of more than 10 years, the above mentioned article is solely based on my experiences with madison management .