With Britain having voted by a narrow margin to leave the EU, we have seen a considerable economic fall-out begin to unfold. One area that does not seem to have been so adversely affected so far is the commercial property market in the UK, with investors from outside of the EU flocking to the capital in a bid to capitalise on the fluctuating pound.
While this news has been slightly offset by the fact that lenders in Singapore have temporarily suspended their loan program for London real estate, this is only expected to be a temporary set-back that will not cause longer-term issues. With this in mind, commercial property should continue to be a profitable entity for owners nationwide.
Here are 5 ways for landlords make more money from commercial real-estate.
#1 – Install Solar Panels
As the technology behind solar panels becomes increasingly accessible, so too the cost of installation falls. With government incentives such as the Feed-in-tariff (FIT) also subsidising buyers who install solar panels, this is an investment that can create a new, passive and lucrative income stream from your commercial property.
With the FIT for domestic installations was cut at the beginning of 2016, proposed increases in electricity costs (estimated at 2.6% per annum until 2030) will negate this amendment.
Furthermore, many companies are now facing the pressures of being ‘green’, a solar PV installation can help a landlord’s property become more appealing to potential tenants to attract a quicker tenancy and potentially higher rates. As from the 1st April 2018, the move to require leased properties to have a minimum EPC rating of E also strengthens the argument for a solar PV installation, which contributes to an increased EPC rating.
A private arrangement can also be made for the electricity generated by the solar PV array to be sold to the tenant at an agreed rate, allowing landlords to receive a higher and quicker rate of return over the long term if buying outright. If a landlord’s property also meets certain criteria, this may offer opportunity for a free solar solution, fully funded and maintained by a third party finance investor, with electricity sold back to the landlord – or directly to the tenant – via a power purchase agreement over a 25-30 year term.
#2 – Include Billboard Placements on your commercial structures
In an age of digital marketing, it is easy to overlook the reach and impact of billboards. These remain an extremely high-impact marketing tool, accounting for 62% of the £3.7 billion that is spent on outdoor advertising every year.
In some instances, this mode of advertising also offers you a unique opportunity to monetise your commercial property. By marketing your exterior walls and offering billboard placements to clients, you can generate a creative and potentially lucrative income stream.
This will depend to some degree on the location of your building and whether or not your property is located on a busy road. You will also need to ensure that your billboard placements do not create a conflict of interest with your existing tenants.
#3 – Rent out Office Space
This is perhaps the easiest and most traditional way to monetise your commercial property, regardless of the prevailing economic climate. Whether your own a business premises that has additional space or have invested in commercial property as a third-party, renting out rooms and units can generate significant income.
There are several ways in which you can pursue this option too. Firstly, you can rent out office space through long-term leases, securing regular tenants over a prolonged period of time. You can also look to rent out individual meeting and function rooms if you have the space, securing a steady stream of regular, short-term bookings.
#4 – Add Value to your Property
Whether you own residential or commercial property, one of the best ways to make money and generate income is to add value. Although this can be easier to achieve with residential homes, commercial property-owners are also well-placed to succeed so long as they budget precisely and understand the core needs of their target clients.
The methods that you use will also depend on the purpose for your investment. As a third-party commercial property-owner, for example, you can design the layout to include as many individual units as possible (without compromising on the appeal of each one, of course).
Investing in a clean exterior and a modern interior can also add value to your commercial property, as you spend and look to achieve a significant return on your investment.
#5 – Become a Tax-efficient Property-owner
If you are optimising the returns available through any type of investment, you must become a knowledgeable and tax-efficient operator. There are several laws and items of legislation that enable commercial-property owners to minimise the amount of tax that they have to pay, reducing operational costs and optimising profitability over time.
One of the most effective and simplistic steps is to invest in your property as a company rather than an individual, as corporation tax rates are generally lower than those that are applied to people and sole traders. Although this may mean that you pay more in capital gains, your associated tax rate will typically fall by investing under a business name.
If you can apply the same principle and attention to detail to similar costs such as insurance, you can minimise your expenses and make the most of your final, rental yield.
The Last Word
These five steps will help you to make the most of your commercial property investment, by reducing costs, adding value and creating innovative revenue streams. They key is to focus on ideas that suit the nature of your investment and the needs of your existing tenants, while it is also crucial that your budget and plan is in intricate detail if you are to succeed in a challenging and volatile marketplace.