Tips on shopping center renovation
I’m acquiring a small (10-12 tenant), old(ish) in-line retail strip center that is presently leased at below market rents. I’m thinking of putting some work into the building after acquisition to justify a bump in rents to market/slightly above market. What are your best strategies for cost effective renovation of dated shopping centers? What types of improvements generate the highest ROI? Facade? Signage? I wanna know how you all put lipstick on the pig.
[{"id": "eupm2gm", "text": "Hi, I would suggest to invest in facade and signage as you mentioned (maybe you could make some new signage positions that you could lease for additional income), but I would also look in a possibility to renovate common areas in order to create open and friendly ambiance for the visitors. Obviously, I dont know the mall or the floorplans, maybe you need a change of lighting fixtures, new floor tiles, or something else. Maybe, if you are comfortable, you could share some pictures of the mall, just so we could get some feeling of what kind of a pig are we dealing with? (to use your words)", "replies": [], "depth": 1}, {"id": "eut6lu2", "text": "Is everybody  month to month?  Why would a tenant pay more just because you are sprucing things up?", "replies": [{"id": "eut89xy", "text": "About 60% are month to month. A larger multi tenant center directly across the street was remodeled about 5 years ago. A call to their leasing agent put their rents about $.75-$1.50 more per square foot than the subject property. Are you suggesting that improvements don\u2019t need to be done for rents to be successfully bumped?", "replies": [{"id": "ev2w2nx", "text": "I'm saying your tenants may not pay you more just because you are improving the outside of your property.  They could have moved across the street but they didn't did they?  If your tenants are a Tatoo Parlor and a mom and pop Chinese market they probably won't see an increase in revenue based on new signage etc.  Maybe a rent increase will chase them out but do you have someone to replace them.  You may be over improving your proper\u0014ty.", "replies": [{"id": "ev6ttj3", "text": "I see. Thanks for your input. If I do decide to improve the property, how are the costs typically divided between tenants leasing varying square feet?", "replies": [{"id": "ev6yzrv", "text": "Usually that is spelled out in the leases. CAM common area charges are usually just for the repair and maintenance of what's there and upgrades would be on you in hopes of getting better rents/tenants on the turnover.  Tenants like a nicer place but if it does not increase their revenue they will be reluctant to pay higher rents.", "replies": [{"id": "ev70d1z", "text": "Interesting. So, it is not commonplace to divide the expenses of upgrades amongst tenants? Landlords generally just eat it in the hopes it will bring rental upside? Or are you saying that with their present leaseholds it would be impossible and would require new leaseholds? I\u2019m also struggling to find circumstances in which building upgrades directly increases a tenant\u2019s revenue. If I\u2019m looking to upgrade it looks like you\u2019re saying that I\u2019ll have to find new tenants that will appreciate the work and pay the higher rent", "replies": [{"id": "evgd5bi", "text": "Do you not have an experienced retail broker representing you?", "replies": [], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]