Investing in and building up a successful commercial property like an office block or retail park is a massive undertaking, even in wealthy and liberal states like Victoria. Getting commercial property loans in Melbourne, for instance, takes a great deal of planning, not to mention a good reputation and track record to attract the best-quality and best-qualified financial backers.
Even if you do get all the financing in place and finish the construction, numerous other problems are common when it comes to managing and running successful commercial properties, regardless of size. Below are some examples of what we mean:
Brick-and-mortar retail is facing stiff competition from online giants nowadays. The most successful ones usually rely on a steady stream of income generated by their online sales, which then helps pay for a flagship store in a more premium commercial space. The real store then acts more as a form of advertising than anything else. This is challenging to retail property owners because it doesn’t always offer very secure foundations.
Should any brand that rents in your commercial space find another place with more favourable terms, a better location, or perhaps they wish to downsize the brick-and-mortar operation, it can cause your occupancy rate to fluctuate. Low occupancy works like a cancer, steadily killing off foot traffic, and thus with it, your other tenants.
Getting the Right Mix of Tenants
Next, a commercial space limits itself on the number of customers it can attract if all the tenants are essentially the same kind. There are some commercial spaces that might specialise in electronics, or perhaps fashion brands, for example, but these are not the norm. Finding tenants to supply the right mix of stores, restaurants, snacks, gifts, clothing, digital, and more, is a big challenge, but the more variety that can be brought in, then usually the more numerous and eclectic the clientele.
Securing the Right Property Management Team
There’s a lot to be done on commercial properties, including security, parking management, facilities management, cleaning and hygiene, public order such as removing vagrants from the space, maintenance and repair, health and safety…the list goes on. To keep everything running the space owners have to find the right kind of day-to-day property management company with the right experience, personnel, and know-how.
There’s a lot of potential liability on your shoulders when you own a commercial property, so having the right team in place to keep things running smoothly cannot be overlooked. You also have to consider the expense of hiring them, however, and how that impacts your tenants’ rents, which then in turn has a potential knock-on effect to other areas.
Marketing the Property
How will you cultivate a brand and image for your space that will make tenants want to come and set up shop there? Vendors may be wary about doing business with you if you are suffering from a brand image problem, or if you have a bad reputation in the community. Was the property constructed to code? Was there opposition to its construction? What have you done to repair relationships with those who initially opposed your project? These are issues that can become haunting spectres when you’re trying to market the place.
We touched on security problems further above and the amount of liability that these property owners face. Investment in security equipment and personnel is bound to be high, with CCTV cameras all over, as well as secure shutters and doors for the overnight period, security guards, alarms, motion sensors…the works. It’s a big investment, and can put a strain on the budget.