Reinventing Commercial Real Estate – Part 3
As mentioned in the previous posts of this series, you need to embrace change and not fight it, as you will benefit from it as a broker, landlord or tenant.
To maintain profitability if you are a commercial real estate landlord you need to focus on maximizing your income and minimizing your expenses. Part 2 suggested innovative solutions for having more income, we will now look at expenses.
Real estate taxes are the thing you cannot escape from. But with the adequate legal help you can always appeal your assessment and get a lower one.
In line with the general tendency, getting “green” and “greener” is worth a lot of consideration. Many buildings are confronted with rising maintenance costs, because they are closely tied with the price of commodities like heating fuel or electricity. You have no control over the price of these commodities. Getting energy efficient is primordial. Sub metering is a first step, putting the responsibility on tenants and not landlords. By doing so, you are giving a strong incentive to tenants in terms of heating, cooling and electrical costs.
Examples to reduce your costs include investing in new lighting devices that have a better rating than the ones you are currently using, insulating your building better, switching to a different energy source, like transforming an oil fired boiler to a natural gas boiler. Many of these steps are also entitling you to receive local or federal tax incentives. In New York State NYSERDA will also provide financing for the study and design costs relating to such “green” changes. There is no limits to what you can do, some solutions like gas micro turbines can even make your building self sufficient in terms of energy costs, you are becoming the energy provider for your tenants.
Also, when doing any sort of improvements, you can depreciate the related costs over a much shorter period of time by using cost segregation. By differentiating structural elements from other elements of your building that have a much shorter lifespan, you can recuperate their cost through depreciation and get some tax money back.
Green roofs, or the use of green technology on your building roof can also bring maintenance costs down through added insulation from plants and soil, reduced water runoffs, which entitles you to additional tax incentives. Additionally it will provide outdoor space for the enjoyment of all.
A combination off all of the above will help any landlord to reduce maintenance costs and have a financially sound strategy for the future. And that’s what affects us all at the end of the day. To sum it up, get greener to make more green…
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