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Maintaining property is always important, but in a commercial real estate market where demand is on the wane, maintenance could be your great value proposition or differentiator. In 2019, we’re at the apex of a 10-year real estate cycle. In cliché terms, it’s time to sell high because the talking heads, columnists and bloggers predict lower demand across many property types and market areas. Their reasons differ, but every real estate prognosticator I know agrees that this is going to be a slow-down year for commercial real estate. With less demand, buyers and tenants have more options and can be far choosier about space. Whether acting as a seller or a landlord, your goal is to put the prospects’ mind at ease about the building. If you want to be in a position to talk closing dates or furniture placement, don’t let your prospective buyers or tenants talk about a stray dog or the building rat — or the worst word in CRE, “tired.”
Residential real estate is all about “the ‘gram.” Instagram listings require professional photos and staging. Professional photos and staging require a fresh coat of paint, a broken door knob repair, sanded hardwood. But, in commercial real estate, especially industrial real estate which is not highly photogenic, maintenance is in the staging.
Maintenance is not a glossy term, except in relation to your bottom line. Lease rates or sale prices are affected by maintenance (and lack thereof). Before calling a broker, before even driving by, prospective tenants and buyers are going to research your building and they’re most likely to do it via street maps or Google Earth photos. When a 2-year-old satellite photo causes the not-so-casual online browser to say, “Yeesh. Is that parking lot blacktop or gravel?” they are likely to keep scrolling.
Maintenance is key. Before bringing a property to market, whether for lease or for sale, it’s essential to have those seemingly small things that you barely notice when you walk through it cleaned up. Think light bulbs, added motion sensors, a coat of primer on the walls, removal of the sofa and television that somebody tossed next to the dumpster around back. Bring people in with a clean, tidy-looking property. Be sure you pay attention to the little big things:
Windows: Nothing shouts neglect like cloudy windows. While a window replacement isn’t an inexpensive fix, tenants or buyers passing on the building due to broken window seals costs more in unpaid carrying costs for the space.
Ceiling tiles: Leave a space vacant for more than six weeks and the ceiling tiles revolt, bulging and yellowing at the corners, sometimes crumbling or worse. While it’s not feasible to heat and cool empty space at the same rate as occupied space, don’t skimp on humidity control. When tiles show signs of leaks from condensation on HVAC ducting, replace the tiles.
Parking lots: Potential CRE buyers are especially sensitive to broken asphalt, potholes and crumbled curbs. Paving can cost $2.50-$3.00 per square foot in the Northeast U.S., so a half acre of parking can add up to or more than $60,000 to acquisition costs. Want to stop buyers before they deduct $50,000 off their offering price? Don’t let grass grow between those driveway cracks.
Landscaping: This is typically one of the quickest fixes, and most practical — curb appeal telegraphs an aware building owner. Cut mature plants away from the building face. Not only do well-pruned plants improve curb appeal, but trimming away foliage cuts down on mold and mildew growth on the building’s façade.
Aromatics: Don’t discount the power of smell. Mildew smells. Run dehumidifiers in vacant spaces and heat them in the winter. Cracked pipes are no one’s friends.
Lights: Keep the utilities on even in a vacant space. Turn them off at the breaker, but not with the power provider. If a warehouse is still wired with sodium lights, look into replacing them with energy-efficient lighting. Even if you don’t replace lights to the whole space, do so with a portion. No one wants to wait for 20 minutes for the lights to warm up anymore. In office spaces, switch out fluorescent bulbs for LEDs or daylight bulbs. Lighting upgrades are not inexpensive, but nothing will drive a tenant out of an office faster than a yellowed light cover.
If these maintenance items are hard to swallow, think about the dollars you’ll save by increasing energy efficiency and sustainability while creating a better product — which will return a higher dollar for your eventual tenants or buyers.