"Don't recreate the wheel." "Imitateingly innovative." Landlords love to copy each other but aren't afraid to recreate the wheel when figuring out how to maximize a building's potential and gain a competitive advantage. COVID shook the industry to the core. Office building owners were left with high vacancies, shrinking tenants, and questions surrounding the viability of the office building for the long term. They want faster, cheaper alternatives that acquire tenants without paying for new buildings. Who doesn't want to save time and money? One of the best ways to do this in commercial real estate is through adaptive reuse.
Commercial Real Estate
Successful companies know that their reputation is what matters in the long run because it affects the way people see their branding image and the overall probability of success as a company. They want to stay within the guidelines of what makes them different, have an impact on the world, and prevent any mishaps down the road that could have been avoided.
Offering a tenant improvement allowance can be costly for a property owner, however, there are things to avoid and strategies to implement while marketing commercial space and during the lease, negotiations to make the additional cost provide a great return on investment. A common mistake a building owner makes is to avoid leasehold improvements as a cash allowance due to misconceptions like the construction process can't be controlled, cost overruns will add logistical headaches for property management, leasing commission for a commercial broker will be calculated to include the value of these incentives, and construction management fees can't be charged. If your goal is to maximize profits or improve cash flow, then offering tenant improvements are excellent ways to do so!
The world is changing faster than ever. A decade ago business owners never would have expected to be having lease negotiations on Zoom or bother to consider how a company can coordinate a construction project via Slack. Changes like these cause you to shift your perspective and create new solutions to make sure your entire team benefits from it, and it’s no different than optimizing it with office buildings.
According to Prologis and Savills, industrial building vacancy is reaching an all-time low (even 2.0% in some markets) and will not be able to support the rapidly growing market demand for space until supply catches up. It has taken too long for real estate professionals to admit that building technology is a NEED to have, not a nice to have. The days of looking at technology costs as anything other than critical when assessing building budgets are over.