How property owners can sustain their yields with rises in service delivery costs

All property owners have one thing in common: the knowledge that they are facing exponentially rising operating costs. Solving the problem of how to sustain yields and profitability in light of rising costs from every direction has become a challenge for investors across the board. 3Cube Property Solutions shines the spotlight on some of the ways that these increasing costs faced by commercial and industrial property owners can be mitigated.

Review your rental rate

The first and most obvious way to keep up with rising costs is to review your rental contracts regularly and increase your rental revenue where possible. It's important to keep up to date with market trends and comparative prices in your area and the best way to do this is to engage the services of a local property practitioner. On the one hand, if you're charging below market rates, you may have an opportunity to increase your yield. On the other hand, however, it's important to tread carefully because pricing your property too high might deter quality tenants or prolong vacancies.

A property practitioner with knowledge of the area and the various economic factors at play will help you establish fair prices that maintain the balance between enhancing your income and maintaining tenant satisfaction.

Reduce your expenses

Increasing revenue is not the only way to increase your net income: you can also consider possible ways of reducing your expenses. Advancements in technology are making great contributions to expenditure reduction. For example, a building automation system collects data about factors like lighting, heating, cooling and water usage. Once a building's operating costs are better understood as a result of this data, mitigation and cost-saving strategies can be put into place.

There are many expenses that should be reviewed regularly to ascertain whether any cost-saving strategies are being overlooked. These include property taxes, security providers, insurance premiums and upkeep of infrastructure, to name just a few.

Add value to your property

Looking at longer-term strategies, another way to increase your rental yield is to make your property more sought after among prospective tenants. Depending on the location, function and condition of your real estate investment, a fresh coat of paint, new flooring, lighting upgrades or landscaping improvements could increase the comfort and appeal of your property. However, such upgrades need to be taken on mindfully, with care to avoid overcapitalisation or overspending on features that may not provide a good return. If you're considering upgrades, speak to an experienced commercial/industrial property practitioner before embarking on the project.

Maximise use of both gross leasable areas and non-GLA space

Thought leaders in the retail environment have been trailblazers in this department, coming up with various innovative strategies on how to monetise non-GLA space in shopping centres. In any environment, be it retail, commercial or industrial, it can be advantageous to review floor plans and assess current layouts to identify any areas that could be better utilised. Offering flexible, adaptable spaces can also be to your advantage. This will allow your facility to meet the needs of various types of businesses, therefore attracting a wider pool of would-be tenants - and incentivising them to pay higher rentals in some cases. 

With some out-of-the-box thinking, underutilised outdoor areas can also be transformed into attractive areas for pop-up shops or cafes.

Think out of the box: offer extra services or amenities

Attracting quality tenants for commercial/industrial properties - and encouraging them to perhaps pay slightly more than they would elsewhere - involves a multi-faceted approach. For example, if space allows, consider offering tenants the use of shared facilities such as meeting rooms or storage facilities. This will appeal particularly to small businesses owners, who may be able to use these facilities as they begin to expand.

Other factors that will give your property added appeal include technology upgrades (think fast internet and smart building systems), sustainability initiatives like solar power and operational support with features like 24/7 security.

Over their decades of helping property owners find the right tenants - and helping tenants find the right commercial, industrial and retail spaces to grow their businesses - 3Cube Property Solutions has gained a unique perspective on how businesses can put their real estate to work to ensure maximum returns on their investments. Contact us for more information.