Although many of the Calgary commercial properties available are fairly new, there are also a number of properties that were built decades ago.
Whether you are planning to buy an aging property or already own one and are wondering if the property is worth altering, you are basically have 3 choices to consider.
The 3 choices or options you face include:
• Renovation
• Redevelopment
• Obsolescence
If you are a landlord or considering going that route, and are planning to lease out commercial properties, or if the property is to be used for rentals or sold as condos, you have to choose between renovation or redevelopment.
If you don’t upgrade and ensure the property is brought up to code, you run the risk of having to pay higher insurance premiums, or even fail inspection.
Plumbing and wiring deteriorates, along with the windows and the roof, so if you don’t improve the property, it will potentially lose value. It’s either improve the property or face the risk of loosing it.
There are many developers who are looking proactively at developing mixed structures which contain both retail space and apartment rentals or condominium spots to provide added customers for the retail outlets, and convenience for apartment dwellers or potential condo buyers.
On the other hand, if you’re a developer who is thinking of buying a property and are wondering about the sale price, here are some things to keep in mind.
The price is generally based more on location and zoning than on property income and cap rates. When considering buying or selling a commercial property then you will most definitely want to use an experienced commercial real estate broker.
You also will want to look closely at other properties in the area as many of the nearby commercial locations may have been built in the same time frame. You need to consider their approach in how they either renovated or redeveloped the property to derive ideas of how the area stands now and how it may develop or evolve in the future.
This means that your redevelopment plan should take into account both a short term approach and a long term approach. By having a well-thought out concept you will have a clearer understanding of your cash flow requirements when you approach a lender if you need financing to achieve your objectives.
A thorough understanding of the area in which you plan to redevelop is essential to ensure that your business plan is practical for what you expect to achieve with such a potentially expensive investment.
There are many important issues to consider for your commercial venture such as zoning, future development in the area, future or planned improvements, access, parking and how all these issues could significantly impact your bottom line.
Redevelopment must be carefully planned so you don’t waste time and resources, but you must be prepared to be adaptable to changing circumstances for a successful redevelopment to prosper. Some tactics which could assist you in your plan could also include a joint venture with other property owners situated in your area.
It all depends on the scope of your vision, availability of capital, planning and research that will determine whether your redevelopment plan will succeed or fail.
Photo by LaFleurs Studios
