Refurbing for Rental Upside
Below is some key information around refurbishing your commercial property, why it might be a good idea, and how Viranda can assist.
There are many reasons why an investor might consider a refurb of their property. It might currently be vacant, providing a good opportunity to raise the condition of the building to attract a higher quality tenant and increase rental yields. Or the property might be approaching its next rental review – an upgrade can justify an increase in rent.
Sometimes it is simply born out of necessity, as was the case for one of Viranda’s clients recently. The client’s building was in the heart of Rosedale Park an industrial precinct on Auckland’s North Shore, on high profile William Pickering Drive.
Unexpectedly, the tenant went into liquidation and the building was left in a dilapidated state, equipment was left behind and it was a real mess – inside and out. If leased in this poor condition, the profile of tenant would likely drop and expected rental returns would also be affected. For our client, it was all about mitigating the lower quality tenant by increasing the profile of the building to attract a higher value and more stable tenant.
So how did Viranda help? Our focus was on saving the client’s time, money and headache of a vacant property. Firstly, we canceled the existing lease and arranged a full clean-up of the warehouse. With a vacant property on our hands and no tenant to disrupt, we were able to use this time to do a refurb. We liaised with reputable contractors to pull together quotes for the landlord’s consideration, then designed an appropriate ‘scope of works’ with the landlord, based on anticipated tenant demand.
With a plan in place for works, we liaised with the contractor, scheduled dates and arranged access. In this scenario, the works were in the range of $120,000 and included:
- removal of portioning walls and excess cabling
- painting the blockwork and offices
- re-carpeting and new ceiling tiles
- a thorough building wash
- and replacing ducting vents on the roof
Before the works were fully completed, we sourced and signed up a suitable tenant. In this scenario, we were able to increase the rent from $105k to $122k on a new 5 year lease. The landlord went on to sell the building which had gained $300,000 in value.
Refurbishing can be complex, time consuming and full of uncertainty, and that’s what we take away. Based on our market knowledge and understanding of the process, Viranda can also protect you from doing any unnecessary refurbishments.
- We have excellent working relationships with contractors and real estate agents and are skilled at finding the right
- We are time sensitive – a vacant building is not performing! Likewise, we try to minimize any disruption to existing tenants.
- When a refurb is underway, we can discuss additional project management if required – it’s all part of being flexible and for you to cherry pick a level of service that suits.
- Viranda is a people business first – we are here to harbour the stress on your behalf.
We’ve got some really innovative ideas around refurbishing for rental upside – so please do get in touch if you’d like to chat about the options.