This time, I’m discussing the importance of accurately evaluating build or redevelopment costs in commercial real estate, looking at the common mistake of applying residential or buy-to-let costing ideas to commercial properties and emphasising the need to understand the market demand and the quality of the final product.
I’ll delve into the various factors that can significantly impact build costs, such as roof repairs, heating system upgrades, window replacements, energy efficiency requirements, fire system installations, and more.
- Evaluating bill costs in commercial property investment requires a different approach than residential or buy-to-let experiences. New investors often make the mistake of applying residential costing ideas to commercial properties, leading to unrealistic expectations.
- When evaluating bill costs, it is important to consider three main factors: the quality of the final product, the actual build cost required for that specification, and the market demand and willingness to pay for the product. Finding the right balance between these factors is crucial for optimising return on investment.
- Building or redevelopment costs can vary significantly depending on factors such as roof replacement, asbestos removal, heating system upgrades, window replacements, energy efficiency requirements, insulation, fire system installation or upgrades, toilet upgrades, and technology requirements.
- Budgeting for build costs in commercial properties can range from £200 to £800 per square meter, depending on the location and specification. It is important to have a realistic understanding of these costs to avoid underspending or overspending on the refurbishment.
“Their expectations can be way off. And that’s often due to applying costing ideas that they’ve built up from residential or buy-to-let experiences.”
“So what are some of the things that might need to be thought about in terms of build cost?”
“I would budget between £200 a square metre to £800 a square metre. That is what we have spent.”
“I think it’ll have a shorter shelf life and a poorer building will cost a lot to bring up to that four-star potential.”
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