How to Increase the Value of Your CRE Asset

In our current economic climate, it’s easy to feel powerless about what’s happening with the value of your investments. Stocks are nosediving, bonds are stagnant, and there’s no shortage of uncertainty about what the future holds. But there’s reason to be optimistic if you currently own or are interested in purchasing commercial real estate: you can add value to your asset to offset rising rates.

As a Commercial Real Estate Investment Advisor, a significant part of my job is helping clients identify assets that have value-add potential. Does the property have potential to increase the occupancy or rental rates? Can operating expenses be decreased without affecting the quality of the property? If the answer to these questions is “yes” then the opportunity exists to create substantial value.

There are several ways to increase the value of a commercial real estate asset, but we’re going to focus on five of the most important ones.

• Make Improvements: Improving your CRE asset not only increases the value of your investment portfolio but also adds value for your tenants. These improvements can be as simple as upgrading commons areas or more in-depth like changing the façade of a building.
• Increase Rent: If your CRE asset needs some upgrades, there’s a good chance that the tenants aren’t paying market rent. Once you make improvements to the property, look at what your competition is charging and assess a reasonable rent increase.
• Decrease Expenses: Review historical operating statements of the property for opportunities to cut costs. Energy efficiency can be a top-dollar item, and tax incentives exist to make your property more “green.”
• Repurpose the Usage: It’s becoming more common for properties to be re-zoned and converted into a different usage, like changing an office high-rise into apartments, or converting an industrial warehouse in a great location to a mixed-use property.
• Add Professional Management: Professional property management can streamline the operation of your property, resulting in a more efficient investment with reduced expenses and a higher rate of rental payment.

Increasing the value of your commercial real estate asset is possible by implementing some or all the ideas listed above, but it’s also important to pay attention to market trends and shifts. If you’re planning to acquire a new asset, working with a qualified Advisor can help you identify market inefficiencies and capitalize on trends, like population and demographic shifts.

Justin Langlois, CCIM is a Commercial Real Estate Investment Advisor with Stirling Properties servicing Baton Rouge, Louisiana and surrounding markets. Please reach out to Justin to discuss your real estate investment strategies.