Key Points:

• Calculation of the commercial real estate rate of return is very important
• Decreasing vacancy is a smart move, but not every time it’ll work
• Consider having multiple revenue resources

You want to lease a commercial space, but with the maximum ROI, and are wondering if it’s even possible or not? So, be happy because yes, it’s totally possible. But only for those who plan smarter regarding things like rent, utilities, maintenance charges, etc. And if you fail to do so, you’ll see the expenses go high and the ROI be dropping down.

Now, you do have clarity on why it’s important to understand how to increase ROI on leased commercial space. And how exactly to do that? No more confusion, as this blog is going to cover all of the relevant aspects in depth. So, sit back and read this piece of information.

How is Commercial Real Estate Rate of Return Calculated?

Now, in the beginning, we have to understand how the ROI of commercial real estate is calculated. Basically, the rate of return is related to the actual cash-on-cash return on investment, divided by the total invested money. Keep in mind that the less an investor invests, the better the ROI they can get. You can also understand the factors that affect the cost of commercial rent.

How Can You Get the Maximum ROI on Commercial Property?

The most effective way is to invest the least amount to get maximum ROI. There are also many other ways to value add leased commercial space like this can be done by investors as increasing the rate of return by increasing the net operating income or the rental money that’s received every month.

Now, we’ll be talking about the top 6 ways to boost your ROI on a leased commercial property, based on these two methods:

• You can increase the rate of return by increasing the value of the property at the time of selling
• The other way is about increasing the operating income while holding the property.

1. You Should Decrease Vacancy

Whenever your rental property is vacant, chances are high that it’ll lose money. When the vacancy rate is low, you’ll have a better net operating income because you are directly increasing the number of units or the time span for collecting rental income.

Although many commercial sectors of real estate do have a certain vacancy rate based on the type of property and location. A 0% vacancy rate is definitely appealing, but it’s very rare while charging market rents.

2. You Can Increase Rents

Although the main goal should be keeping the vacancy rate low, you should try to keep the rent low or just market competitive. Some of the investors implement the strategies for increasing rents when the value of the property is below the market value. Also, the increase should be done regularly to match the inflation rate and show changes in costs such as property insurance, taxes, and utilities.

3. Reduce Expenses

The best of all is to keep your costs as low as possible. It’s a great way to increase your rate of return. We know that it’s not always very easy to do, but there are some indirect ways to do so, especially after getting a property that wasn’t managed well previously.

4. Try to Build Additional Revenue Sources

It’s a smart move to create extra sources of revenue, which are also great for commercial property investment returns. This can be done by applying the other mentioned strategies too. There are some common additional revenue sources, which include:

• Charging rental fees for extra space, such as parking or a garage
• Collection of the late fee

5. Make the Property Better

Usually, people think that making the property better won’t help increase ROI on leased commercial space. But if it’s done using the right strategies, it won’t only increase the overall value of the property but also justify higher rents and help attract new tenants. And if you focus on energy efficiency in commercial buildings by installing energy-efficient windows or other appliances that reduce expenses while increasing return.

6 .Expand the Space

Last but not least is to expand your property, where you can have more rental units. Even though it’s not an option for everyone, because some choose the land where they can expand it to add more units, space, or buildings.

Final Thoughts

We know that increasing the ROI of the commercially leased space isn’t easy, but it can be done by implementing certain steps. You can reduce the vacancy or go for expansion of the space; both will help in increasing ROI. Also, you need to spend the least to get the maximum. These are a couple of smart ways to boost the ROI.

Now, how to search for a company that assists you in all of these important ways? Don’t worry when 25 Van Zant is here to help you. Not only will you find the right commercial spaces for rent in CT, but you can also boost ROI. We have an area of 265,000 sq. ft. to accommodate various businesses. If you are interested in renting a desired business space, reach out to us NOW!

Frequently Asked Questions

What is Property Management ROI?

Property management ROI is a very important factor in calculating the profit of the property. You can calculate it by dividing the operating income by the total investment cost. If you have a high ROI, it’s a profitable investment, but if it’s low, there are underlying issues you must address.

How can you achieve energy efficiency in commercial buildings?

It can be done using multiple things, like:

• Proper insulation
• High-performance windows
• Building automation systems (BAS) for better HVAC and lighting.
• Using skylights
• Solar panel installation