BUILDING REPOSITIONING – MORE THAN WHAT MEETS THE EYE
Within the commercial construction industry, the term “Repositioning” can be simply defined as updating or renovating an asset to target a new market by changing its image. However, it is not merely the renovation of a building, but rather the transition from one market segment to another or the upscaling from one class of building to another.
Owners of older properties that have inefficient and outdated building systems, structural elements in need of upgrades and repairs, and facades that are aged and uninviting can take the opportunity to reposition the timeworn building in the current market place. With this process, the Owner can breathe new life into an asset that may seem to have lived passed its time.
TIPS TO CONSIDER WHEN DECIDING ON BUILDING REPOSITIONING:
• Let the current surrounding market conditions drive the decisions.
Often a property that needs rehabilitation has been around for twenty plus years. Over that time period, the surrounding area may have gone through major transformations. In other words, what was once a primary factor in the development of the asset may no longer be relevant. As an Owner, it is critical to conduct market research and evaluate whether the specific property use is still valid or if a change should be considered. A simple cost-benefit analysis to determine what will generate the highest returns should help guide the Owner in the appropriate direction. However, Owners frequently find themselves emotionally attached to the building in its current form and find it hard to let go and re-invent, but they cannot let this personal tie cloud their decision-making.
• Communicate, Coordinate, Consult.
There is nothing worse than an angry tenant who didn’t realize the impact of the construction work on their business. When buildings are occupied during the repositioning process, it is imperative that the Owner communicates his plans with the tenants as early as possible. Finding out what is important to the tenants, e.g. how their business operates, the peak times when construction should be avoided, and the critical times during the day when building systems are required, is essential for successful coordination before any work begins. Additionally, regular communication during construction is just as critical. It is important to remember that the existing tenant may be your best spokesman when you need to generate buzz with potential new tenants.
• Spend Wisely.
We all like eye candy. The temptation is there to spend large portions of the capital budget on making the property look attractive. Although image is important, what will really provide the best returns and bring savvy tenants on board is to upgrade older, inefficient building systems and infrastructure. Today’s tenants place a significant value on efficient energy systems that have a reduced impact on the environment. They recognize that these systems will not only have a positive impact on their bottom line, but will also align well with their corporate branding. Sophisticated tenants want to be associated with brands that are eco-friendly and consequently are often willing to pay a premium for it. By spending critical dollars from the budget on energy efficient systems and upgrading the infrastructure, the building will create a brand that tenants wish to associate themselves with. This implementation will be far more valuable, and profitable, than simply engaging in cosmetic changes that may look pretty on the surface, but ultimately leave the building functioning just as poorly as it did before any renovation. Don’t get caught slapping “lipstick on a pig.” Of course, this doesn’t mean that no cosmetic changes should be done. We are all visual people, thus a well thought out landscaping plan, along with a modern entrance, lobby, or façade will emphasize to the new tenants that the property is cared for and in good hands.
• Don’t Forget the Marketing.
All too often, construction projects go over budget and run into delays. Therefore, when it comes to rolling out the newly repositioned building, there isn’t enough time, focus, or money left in the budget to have a grand opening fit for a newly renovated building. With the primary focus on construction, it is too easy to forget about the selling part of the equation. The phrase “if you build it, they will come” works only in the movies. Don’t forget to begin the marketing well before the construction is completed. Potential tenants love to see the rawness of the building while under construction. Give them a hard hat, walk them through the space and ask them what they would like to see in the building. By engaging at an early stage, they are getting further invested in the space. When construction is finished, have a grand opening reception, invite the local politicians, and talk about the impact your project had and will continue to have on the local community. Showcase the energy efficient building systems. Show your pride in your work. We all want to associate ourselves with successful people, projects, products, and services. So show how you took a run down, outdated property and made it a true asset for not only you but the community as well.
About the Author
Asif Virani’s Construction Management career has spanned over 14 years, ranging from ground up elementary schools to office building repositioning in downtown DC. His projects have often won national construction industry awards, including one that was visited by President Obama and Bill Clinton to launch their Better Buildings Initiative program. Most recently, Asif has taken on a new challenge with his online startup, Renovisor.com, where home owners are able to get project specific advice, guidance, and help for their home renovation projects. However, his biggest challenge thus far, and one he would love to get advice on, has been trying to get his 2 year old daughter to drink milk without putting up a fight every night.