How Your Tenants Affect The Value Of Your Commercial Property

Do the types of tenants you have affect the value of your commercial property? The short answer: yes they do.  The inherent value of a property is intrinsically tied to its perceived merit. If no one wants to occupy your commercial property, regardless of how much you paid for it, its worth takes a hit. In the greater scheme of things, the value of your commercial property – just like residential property – is determined by and large by the economic precept of supply and demand. Put another way, your tenants have considerable power to affect how much your property is worth, and here is how they do it.

1. Tenant perception dictates the property’s value

It doesn’t matter if you paid a fortune for your commercial property or how many thousands of dollars you spent refurbishing the place. If tenants don’t believe the property is worth the rent you’re asking for the value of the place may drop. This is because part of the value of a building is determined by how much money you can make off of it.

If you’re not making any profits monthly, you’re running a loss. But a commercial property that’s seen as lucrative, a good investment, and provides tenants with favorable terms and conditions will be in high demand. This will inadvertently raise the property’s value. In order to sway tenant perception, you have to be ready to compromise.

You may need to invest before you can reap the rewards. This may mean raising curb appeal, renovating the interior, and making the building safer and more environmentally friendly.

2. Tenant care (or lack) of your property greatly affects the value

One of the most common complaints issued by property owners against tenants is the recklessness and lack of care for the property they are occupying. Bad tenants can do a lot of damage to your property which invariably will affect the value of your commercial property.

From failing to report leaks, broken items, and problems that may lead to structural problems later on, many tenants cause great harm. This is why it is very important for commercial property owners to work with established property managers such as PMI Colorado Front Range who can carry out routine property maintenance to ensure that all is in order.

Having an experienced property manager to oversee tenant applications can also help you weed out the difficult tenants and save you from future issues. Something that brings us to the next point…

3. Tenant activities and or business can affect your property value

A surprising number of independent landlords often overlook the importance of a comprehensive and thorough criminal background check. One of the fundamentals of finding good tenants is effective screening. Who are your letting to and what sort of business will they be running on your premises?

To illustrate this point, one only has to look at commercial properties that are occupied by reputable companies with good standing. Immediately the perceived value of that property goes up simply by virtue of having a well-known anchor tenant of good social standing. Favorable anchor tenants would be luxury brand stores, mobile phone service providers, gyms, restaurants, and law firms to name a few. These types of tenants will boost the value of your commercial property.

Looking for an efficient property manager?

Are you keen to have someone else manage your commercial property? PMI Colorado Front Range offers a range of property management services including tenant screening, property marketing, maintenance, rent collection/deposits, accounting/statements, move-in/out inspections, and day-to-day management. Contact us for more information.