You may know the benefits of owning a commercial investment property and a question we are often asked is “do investment properties always appreciate?” In a perfect world, yes – every investment property would increase in value. Unfortunately this isn’t realistic, so it’s important to look at what causes commercial property appreciation. This will help you make wise investment decisions on your next Melbourne / Palm Bay, Brevard, FL property.
What Causes Commercial Property Appreciation?
There are countless factors that affect the value of an investment property, but we will focus on some of the most common ones. Using a commercial real estate broker with a proven process can help you prioritize and weigh the unique factors of each property you consider.
The biggest factor that affects commercial property appreciation is demand. If your investment property is located in a city that has limited land for development, then chances are the demand is high.
Do you seek out ways to improve the property? Many investors improve the landscaping, remodel older units in an warehouse building, add parking, and increase the amenities for tenant’s. This is called the value-add approach, as mentioned on Fundrise.com and can be applied to any type of commercial property that goes beyond general maintenance.
Are there areas of your commercial investment property that could be better used to bring in more income? Renovating older areas of a building, such as an office that hasn’t been updated in five years or a community kitchen that could accommodate more tenants adds value. Older buildings can bring problems that new buildings don’t have, such as electrical, plumbing, and HVAC systems that are not up to code. You will need to focus on major renovations first, before bringing in tenants.
What Causes a Commercial Property to Depreciate?
There are active steps you can take to help your property appreciate, but what causes it to depreciate?
Market demographics change
One of the biggest reasons for decreased value is when other businesses or industries leave the area. Perhaps your location is home to manufacturing and the need for certain types of manufacturing have declined. This can cause once booming warehouses and businesses to remain vacant and lead to a decline in demand. Getting active to see how vacant buildings can be properties in your community to appreciate.
Market requirements change
Tenant’s may require higher ceilings in a warehouse building for rack storage, or outside paved fenced storage.
With over 50 years of combined experience, the Ullian Realty team has a proven record for helping clients find investment properties that appreciate in value. We understand how valuable a local broker is for investors which is why we’ve developed the Ullian Realty Process. Give us a call to learn more about how we will partner with you on your next investment.