Market Insight

How can investors maximise returns on their commercial property investment?

March 1, 2016

As any investor will know, it is vital to maximise investment returns. This is particularly true of property investment, which although stable at present, has for a number of years, witnessed volatility.

However, it is surprising how many people put their properties on the market without taking some of the more basic steps to help maximise their investment returns. It all stems down to effective asset management, and the key is not to miss the basics because they can significantly determine investment value when you come to sell.

The good thing is that there are a number of straightforward steps that you can take, including lease renewal, rent reviews and even some good old fashioned communication, which together can help you to maximise your returns. Here’s how.

Lease renewal

It’s very typical for medium sized property companies not to talk to their tenants for fear generating lots of issues to solve, but there are a number of benefits that can be reaped through improved communication in the investor/tenant relationship.

I recently visited a client whose tenants were quietly saying they wanted to take more space in the building, but they hadn’t informed their landlord of this. When asked why not, they replied ‘well they’ve never asked’.

If your building is part-void, you will inevitably get less for it. However, if you communicate more with your tenants, not only will this make them more contented, but you may just discover that they are looking for more space, which can save you money when it comes to selling your investment as a fully let asset.

Happy tenants ignore break clauses, stay longer and tend to commit to new leases. The net result is that every time you commit to new leases, you often get a rental increase and this can also act to enhance the value of the property.

Rent reviews

When it comes to rent reviews, you often find that when you buy a property and the previous rent review hasn’t been determined. However, the process of carrying out a rent review can lead to rental enhancements, particularly in the office and industrial sectors which continue to grow.

For example, it only takes a rental increase of £1 per sq. ft for a 60,000 sq ft unit to suddenly be able to crystallise a potential value of £950,000 million.

Basic asset management

Don’t fall into the trap of not carrying out those basis asset management principles which can significantly determine the investment value when you come to sell.

You might have a roof leak that you could put through a service charge but haven’t done anything about. Well make sure that you do, because it will put off a prospective buyer who might then have to pay for the repair themselves.

If your property is dirty and it smells of damp, and the floors are covered in several months’ worth of dead flies, this will inevitably have an adverse effect on your ability to sell, so make sure you make the asset as attractive as possible to future tenants.

Address any necessary issues from an asset management perspective, such as leaking windows or water stains. Make visual improvements and keep the property clean, no matter how long it has been on the market.

Sometimes it’s the simple things and considerations that we miss because it’s easy to get distracted by the end goal.

However, if you implement these measures you could ultimately have a much easier time throughout the selling process, generate more interested parties, and make more money out of your property investment as a result.

For more information on how you could maximise the return on your property investment, don’t hesitate to get in touch with our team of commercial property investment experts.