Remodeling Investments that Will Pay You Back

January 21st, 2014 by Diane Moore

 The costs of remodeling are plummeting, to the delight of property owners who have the affording capability to make improvements to their commercial real estate.

Remodeling

Remodeling

Remodeling expenses have fallen by 10-15% in the last five years even when the cost of materials have gone up by 17%, according to Sal Aflano, editorial director at Remodeling magazine, which recently came up with its Cost versus Value Report.

 

This sounds like an excellent news for consumers. However, with properties being sold at reduced prices, the recouped amount from a project on selling the property is drastically falling.

Return on Remodeling Investment Was Lowest in 2012

 

The last six years have witnessed steady erosion on the return on remodeling investments. Payback was at its height in 2005 when property sellers earned close to 86.7% on the money they spent on remodeling their properties. This return has been slumping ever since, reaching a low of 57.7% in 2012.

 

Despite the annoyingly low payback, replacement projects can be really powerful. Alfano says that such projects are cost-effective and enhances the look of the building immediately. If you obtain new siding, new windows and replace the main door, the commercial real estate property will look great. It will be sold faster for a decent sum of money.

Return on investment

Return on investment

According to the report by Remodeling Magazine, the use of low-maintenance and durable materials in replacement products is a great appeal to property buyers, who are looking to cut down the maintenance and operational costs in their properties.

An Overview of Remodeling Commercial Properties

 

Remodeling of an existing commercial real estate begins with demolition work. This could be just a part or the whole of the interior space. However, as a measure to save the expenses, most property owners would like to utilize the present infrastructure of the property. Things, such as electrical panels, heating and air, telecommunication wiring or plumbing fixtures may be economic to remodel. Commercial remodels very often include new lighting system, flooring and moving walls.

 

While performing a commercial remodel, the pertinent question that arises is whom to choose to do the work. It’s wise to select a contractor who has sufficient knowledge on retail or commercial space remodels. Contractors performing residential remodels may not be acquainted with the intricacies of commercial real estate.

An Overview of Remodeling Commercial Properties

An Overview of Remodeling Commercial Properties

Traditional contractors who are basically involved with new buildings will ignore areas of cost-savings and utilize the existing infrastructure. On the other hand, a contractor who works on commercial remodels can easily find ways to cut down on the costs besides doing remodeling work that will pay back.

Important Steps to Be Followed before Remodeling

 

The basic information that will be required before starting remodeling work is as follows:

 

  • Information on existing buildings and building code violations which will have to be addressed in the fresh project.

 

  • Information on regional demographics of the general population and the business community.

 

  • Local zoning rules and regulations that can have an impact on your commercial property.

 

  • Plans of existing structure to be remodeled. This includes site drawings and built drawings.

 

  • Conceptual drawings and a line sketch of the changes to the new property.

 

  • Seek soil reports to recognize soil stability besides safety measures for the project.

 

  • Close inspection of the current property by an experienced engineer to identify concerns and other structural issues.

 

  • A list of must have targets or items without which the project cannot function.

 

  • Find an independent estimator who can give you a rough idea of the value of the property before and after remodeling work on the structure.

 

  • Meet up with local real estate agents to get an idea of property enquiry, trends and requirements from the local area.

Top Remodeling Investments

 

Here’s a list of some best remodeling investments on your commercial property that will give you the maximum returns.

 

  • Replace exterior siding

The exterior siding has to be replaced with high-quality fiber cement. It’s amazing to note that siding can pay back approximately 78% on the average cost, which comes up to $ 13,461. The most economic remodeling you can do to your commercial real estate is to replace your old siding with something new, upscale fiber cement.

 

  • Replace the entry door

 

Replacing the entry door of the property with a 20-gauge steel door can be an inexpensive upgrade at approximately $ 1,238. However, it has the potential to pay back 73% of this amount and greatly enhances curb appeal.

 

  • Expand the property

 

Adding space can play a big role in enhancing the value of your commercial real estate.

Expand the property

Expand the property

  1. Evaluate the local market, the characteristics of the property and its location as these will help you to determine what kind of space would be the most beneficial for the property. For instance, depending on the purpose of the property, you may improve its value by adding more warehouse, office, parking, amenity, storefront, conference, storage, living and gathering space for the staff.

 

  1. Meet up with local building authorities to obtain the necessary permission prior to commencing on expanding the space.

 

  • Layout

 

What’s the first impression you’d like to create when your potential clients glance through the windows of your property? Remodel your building keeping these customers in mind, and develop a safe and comfortable space which can be easily scanned by shoppers as they enter the premises.

 

  • Lighting

Lighting

Lighting

Select lighting that will complement the sounds and mood you’d like to create in your space. Use track lighting in regions with low or dim light. This will direct almost all of your customers to the displayed merchandise that can eventually pay you great returns. For instance, day spas usually create a “warm and relaxing” mood by using dim lights into shelving units and custom cabinets.

 

  • Revise the signage

 

Remember that the signage attracts people to the building. It should ideally represent the purpose of the property.

 

If the signage is insufficiently sized compared to the architecture, obstructed by the landscaping, unappealing aesthetically, is difficult to read, than the first step to be taken by the property owner is to update the old one.

 

Consider a wide variety of sign materials, styles, placements and sizes. Visit a sign maker to know of all the options and make an informed decision.

 

  • Go Green

Go Green

Go Green

When remodeling your commercial real estate property, an important aspect that has to be kept in mind is eco-friendliness. Besides keeping your building relevant in the earth-conscious consumer market currently, it will also cut down overhead expenses. Green alternatives include energy-efficient appliances, energy conserving windows and solar panels.

Cost versus Value Report of 2013

Cost versus Value Report of 2013

For the first time in a span of six years, the overall cost versus value ratio has improved, touching 60.6% in 2013, as stated by Remodeling magazine. This is an improvement of 2.9 points compared to the figures for 2011-2012.

 

The biggest gainers of 2013 were replacement projects, which outperformed unrestricted remodeling commercial real estate projects. Lower construction projects for the third year had a powerful influence on the developed market picture, even though stabilizing resale values played a major role.

 

Places where remodeling will pay you back the least:

 

  • Middle Atlantic-Pennsylvania, New York, Connecticut and New Jersey-56.8%

  • East North Central-Indiana, Illinois, Wisconsin, Ohio and Michigan-55.3%

  • West North Central-Nebraska, Dakotas, Minnesota, Missouri, Iowa and Kansas-49.5%

 

Final Thoughts

 

The money and time required to remodel a commercial real estate property can be somewhat frightening. However, if you factor in certain aspects-which include contractor cost and skill, location, interior design and new merchandise-you’ll improve your chances of performing remodeling work that will certainly pay you back.

 

Diane is a highly-qualified translator of the English, Italian and Spanish languages. She has studied extensively in Italy and Switzerland. She writes about a variety of financial services industries including insurance. She has a love of life and a curiosity that drives her both personally and professionally.

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