While lease payments are the foundation of commercial real estate revenue, it’s the little things that can make owning a property more lucrative. Here are eight ways to increase revenue for a commercial property without disgruntling tenants by raising the rent.
#1 Offer À La Carte Services To Tenants
Offering extra à la carte services is a tried-and-true technique used in other industries. For example, airlines charge people for roomier seating, extra bags, and priority check-in.
Similar techniques to raise revenue in a commercial property without raising rents include:
- Offering cable TV or faster internet service,
- Renting premium parking spaces or storage space,
- Adding vending machines,
- Charging for concierge-type services like pet walking and daycare,
- In-house janitorial and cleaning services for tenants.
Often vendors will offer property owners a bulk discount for repeat business. This allows the property owner to provide tenants with add-on services at rates lower than they could find on their own.
#2 Create A Coworking Space
Restaurants and hotels offer coworking space to generate extra income from square footage that isn’t used during certain times of the day or week. There’s no reason commercial office building owners can’t do the same.
Converting a large vacant suite into coworking space is a great way to generate a higher level of revenue per square foot. Creating coworking space also gives building owners a built-in prospect base. When a start-up business outgrows its coworking space, they’ll be ready to transition to a longer-term commitment in the building.
#3 Rent Event And Meeting Room Space
Event space and meeting rooms don’t have to be reserved exclusively for tenants. By thinking outside of the box, building owners can create meeting areas, event and party rooms, and popup spaces for special events and gallery rentals catering to local businesses and entrepreneurs.
For example, the New York Academy of Sciences offers its 40th-floor event space in four different rooms at the 7 World Trade Center. Over on the west coast, owners of an art deco creative office building in the Financial District of Downtown Los Angeles offer 3,000 square feet of event space, 1,600 square feet of lounge space, and customized à la carte services by the hour including staffing, security, and catered breakfast, lunch, and dinner service.
#4 Monetize Vertically By Selling Ad Space
Selling naming rights to a current or prospective tenant not only generates additional revenue from the commercial property, but virtually assures the tenant will stay long term. Having their name on the building or prominent signage is a powerful incentive for the tenant not to relocate.
Property owners who’d rather keep control of the building’s identity can consider naming the property. While doing this doesn’t directly increase revenue, giving the building a name creates a character and brand identity. Distinguishing characteristics like these can justify a higher rent per square foot and increase the market value of the property.
#5 Increase The Amount Of Rentable Space
Maybe you have a building still under construction or some existing vacant square footage. If so, designing the interior to allow as many offices as possible is another way to increase revenue in a commercial property.
When doing this, consider hiring a professional interior designer. Space shouldn’t be so small that it feels cramped, but tenants appreciate a well-designed space and will often pay more for a little less square footage.
#6 Certify For A Green Building
Improving energy efficiencies lowers operating expenses. Certifying for a green building also helps to attract progressive tenants willing to pay a higher lease rate per square foot for a smart, connected office space.
Making a commercial office building more energy efficient can be accomplished in a number of ways including:
- Installing energy-efficient light bulbs throughout the property,
- Investing in a smart HVAC building automation system,
- Water-saving plumbing fixtures,
- Tank-less hot water heaters and on-demand systems.
#7 Lower Tenant Turnover
Tenants have begun viewing office space as a service instead of a fixed asset. Property owners can keep tenant turnover in an office building lower by:
- Creating unique services and characteristics that set the building apart from the competition,
- Treating tenants professionally with an orientation toward customer service,
- Valuing tenant concerns by asking for feedback and suggestions,
- Responding urgently and satisfactorily to the needs of each tenant.
#8 Reduce Major Repairs With Regular Maintenance
Some property owners try to increase net income by reducing the amount of routine maintenance. This tactic might save a few dollars in the short term but can backfire in the long run.
Regular routine maintenance of a building’s operating systems greatly reduces the risk of major plumbing, electrical, and HVAC issues that can create dissatisfaction leading to increased tenant turnover.
There are a variety of ways to increase revenue from a commercial property without increasing the rent or alienating the tenants. Savvy property owners begin by conducting an in-depth survey of the market and of their tenants. Then, they make sure to offer the extras that people find beneficial and that lead to more revenue without raising rents.