One of the most fun and interesting parts of commercial real estate is creating value with an existing property!
This blog is written for the owner user or landlord who owns an industrial building with value add potential.
Let’s discuss how to increase the value of a property for potential buyers, tenants, or to generate excess cash flow for an owner user.
What Features Make an Industrial Property Valuable?
Sewer
The first underground sewer system was implemented in 500 BC in ancient Rome.
Although we have advanced tremendously since then, the basic principle holds true: two core resources needed in an advanced society are water and sewer access.
A property that has sewer or access to sewer is more valuable than a property on septic.
Even if septic is appropriate for the building’s current use, a buyer who has a long-term mindset (future development possibilities) will value the property more if sewer is available or can be accessed.
Office Space
Office Space in an industrial building can bring value, but there’s a catch!
Most industrial users do not need a large amount of office space, but having a few nice, renovated offices is a positive feature for most tenants or buyers.
Interstate Access
Two words: Transportation costs!
With the increase in gas prices and in areas with congested traffic, transportation costs are more crucial than ever to consider.
If a property has close and easy access to the interstate or is visible from the interstate, then many tenants or buyers will pay more for the location. Convenience and advertisement opportunities are certainly something highlight for properties with this feature.
High Ceilings
Tall ceilings are in demand. While older industrial buildings are often built well with thick slabs and walls, many have lower ceilings (10, 12, 14,16 ft).
Like interstate access, unfortunately, ceiling height really can’t be improved or changed! High ceilings allow for many uses and is a huge plus when it comes to selling or leasing a property.
Drive in Doors and Roll up Garage Doors
A building with drive in doors and roll up garage doors allow for more uses.
Thick Slab
A thicker slab (6 inches or more) is necessary to operate heavy machinery inside a building.
3 Phase Power
Big power allows for the operation of big machinery.
LED Lighting
With energy efficiency becoming a bigger part of commercial real estate, LED and motion censored lighting will save an owner money or is a great selling point to a tenant who will pay the monthly power bill.
Ample Truck Parking/Truck Access
If trucks cannot easily access the parking lot or if parking is tight, then this will limit who can be a user for the property.
Having excess land gives an owner several options on ways to increase the value or cash flow on a property.
Excess land
Timbering
If a property has several acres of excess land, timbering the property may generate some cash for the owner.
Laydown Yard or Additional Truck Parking
If there is excess land surrounding a building, then a laydown yard will create additional value to the property.
There are several prospective tenant types whose use requires laydown yard space or ample truck parking. The landlord’s asking rent can be increased because of these features.
Leasing Land
Similar to additional parking/laydown yards, a landlord can generate cash flow by leasing land for outside storage (such as shipping container storage). Imagine raw, vacant land now generating cash flow every month!
Selling a Parcel or Offering a Built to Suit
If a building is surrounded by excess land, consider if selling a parcel or offering a built to suit would be a viable option.
A positive attribute of built to suit is it lowers the risk of a landlord owning a piece of vacant real estate since the tenant and lease terms have been established before construction.
Conclusion
The best part of commercial/industrial real estate is there are sometimes creative ways to increase the value of a property to lease or sell or generate income for the existing owner.
While I did not give a comprehensive list of value-add ideas/ valuable features of an industrial building, these are certainly factors to consider in maximizing the value of an existing property.
If you’d like to discuss this blog or anything relating to commercial real estate, lets connect!
Emma McDaniel, Vice President
864-576-4660 office
emma@mcdanielandco.com
