Savvy investors can make a lucrative return by investing in office buildings. Each of the four commercial property types have risks and benefits associated with them. In this post, we’ll go more in-depth on investing in office buildings.
Investing in Office Buildings: Tenants
Best case scenario, your office building will already be filled with tenants when you purchase. That way it can immediately begin generating cash flow for you. Ideally, your tenants will be respectable members of the community, with a few years left on their lease. This gives you time to settle into your role as a property manager. As well as flexibility in planning ahead for when the tenants decide to move on.
If you’re investing in an office building without tenants, begin to advertise the space before you’ve even signed the deal. Unlike residential and multi-family units, vacancies in office buildings can take longer to fill. So make sure you have the funds to go at least a year without an income from the office building. Market your office building online, in the paper, at business gatherings—anywhere potential tenants are looking, you should be.
Investing in Office Buildings: Economy
The success of investing in office buildings is highly reliant on both the local economy, as well as the economy at large. When times are good for business, times are good for those who invested in business buildings. If the economy shrinks though, expect to take a hit to your bottom line. Locking in tenants with longer leases can help mitigate some of this risk, but don’t expect those to keep your investment completely afloat if the economy weakens tremendously.
Investing in Office Buildings: Rent Prices
With these risks should come a higher rate of return. To offset the liabilities of investing in office buildings, you should be charging a higher rental fee than you would for residential and multifamily. Keep your rental prices competitive. But make sure you’re making enough income to set some aside for when times get rough.
Investing in Office Buildings: Meet Other Property Owners
Make your way around the location and talk with other property owners who have invested in office buildings. Discuss the lease arrangements they have with their tenants, how often they renovate, any tips-and-tricks they’ve learned over time, and anything else that may be valuable to know before you go investing in office buildings.
Interested in buying, selling, or leasing an office property? Get in touch with a commercial property broker today!
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