Value-add properties are perfect for investors who like to increase cash flow and equity of a recently purchased property through key renovations or enhancements.
For these investors, value-add investments offer the perfect balance between risk and reward.
It’s a method that can be used in both primary and secondary markets, in all niches, and allows investors to reap increased profits by capitalizing on the lack of quality office properties or low supply/high demand markets.
Discovering the Diamond in the Rough
Every investor hopes to be the one that discovers an overlooked, neglected (but not too neglected) property that with the touch of a renovator’s wand, can be turned into a prime property that happily fits in the Core category.
The types of renovations likely to raise a property’s value, of course, differ depending on the property type. For office properties, there are several types of renovations that are particularly in demand.
The tech revolution has made the idea of flex space a household name.
There’s a good reason for that, however, and it’s not just because companies want more conference rooms. Space is actually a company’s largest expense, after the cost of maintaining employees. So it’s natural that executives are looking for ways to maximize their use of space at minimal cost.
Practically flex space looks different depending on the business type and location, with the space occupied by R&D companies looking radically different than flex space occupied by a startup.
If you’re thinking of adding flex space to your office building, make sure to heavily research both the types of businesses likely to take your property and what they wish they had in an office. In general, however, the open space plan is the most sought-after feature.
Energy efficient buildings are at the top of the list when it comes to company demands. Business owners have discovered that not only do LEED-certified buildings cost less to run, but consumers are actively choosing companies who use eco-friendly practices in the workplace. Owners benefit from energy-efficient buildings too. Lower operating costs, healthier internal environments, and increase property value are just some of the pros of green buildings.
Don’t assume you need to make big changes in order to hop on this trend, however.
While some developers are adding high-end amenities such as circadian rhythm lighting systems and solar panels are an option, you can save money and increase your property’s attractiveness to tenants with small changes too.
Changing standard light bulbs to more efficient LED lights, for example, is a small change which costs relatively little, but can make a big change in your bottom line… to the tune of more than 40% per bulb.
Some common eco-friendly renovations include green flooring, low-VOC paints, triple-glazed windows, and non-toxic finishes. Anyone of these additions will significantly increase your property’s appeal.
Smart Building Technology
Millenials now make up the largest part of the workforce, and as a result, companies are bending over backward to accommodate them. As one of the first generations to grow up with the Internet, cell phones, and cable TV, millennials view tech as an essential part of their lives.
That familiarity goes beyond social platforms, however. Social platforms aside, millennials use tech to automate and optimize workflows, communicate with fellow employees, and improve their efficiency.
In order to please their tech-savvy employees, companies have begun to invest heavily in systems that help automate building operations.
For example, network-based HVAC systems are used to monitor performance and adjust the heat, air conditioning and ventilation based on the time of day. Other smart building systems can help owners reduce the amount of electricity being used by scheduling in “electricity reductions.”
Other systems streamline visitor management by allowing businesses to register visitors through email. Instead of checking in with security and receiving a pass in person, companies can issue barcodes to visitors.
Decorating With Natural Materials And Colors
The trend of decorating with natural materials and colors is here to stay.
Experts say it’s not simply a matter of tapping into the popularity of sustainable living, but that the connection between the outdoors and the indoors boosts employee productivity, increases employee satisfaction, and lowers operating costs.
Small touches like adding green walls or designing office space so that it gets plenty of natural light are some of the most common requests architects are receiving. And when you consider the fact that attendance at work and employee productivity increase when there is a better connection to the outside world, then adding natural elements to your office design makes good economic sense.
Add More Square Meters
Increasing the amount of available space in your office property is one of the most effective ways of increasing value, but it’s one few owners consider.
Typically office buildings calculate rental square feet in two ways: rentable square feet, or usable square feet.
Usable square feet is the actual amount of space a business occupies, while rentable square feet includes a portion of the space occupied by stairwells, hallways, closets, bathrooms, lobbies, and storage rooms.
You can increase the amount of useable square feet either by tearing down walls and implementing an open office plan, or you can consult with an expert who can show you how to add extra space without doing any major renovations.
As an owner, you most likely won’t be able to implement all of these changes. However, you can pick and choose the ones that are most likely to yield higher profits. The best way to determine what’s in demand in your area is to actually visit several offices in the area and make a note of what they’ve done to make their office properties stand out.
You can also ask office tenants in an adjoining area what they like most about the building they’re located in, and what feature they wish they had if they were renovating an office building.
Armed with this information, you should be well on your way to adding unbeatable value to your office property.