Commercial property construction as an investment

 

When performing construction work to a commercial property it only makes sense to consider these expenses as an investment.

  • Will that investment pay off?
  • Are there other, better, investment opportunities?
  • Will I be able to get this same work later for more or less expense?
  • Will delaying this work accrue extra damages if not performed promptly?

 

These are some of the important questions a property owner needs to consider. At soco construction your concerns make a lot of sense. Many contractors will explain that investing in your building is always a good idea. But I would like to talk about why this is not necessarily true. To break this down better lets divide this discussion up into three major factors affecting your work.

  1.  The scope of work
  2. The quality of the work
  3. When and how fast

 

The scope of work is a key consideration. If you are a an end user the scope of work might be dictated by the business. But that doesn’t mean you can’t save money! Frequently innocent and relatively small architectural mistakes lead to big cost increases. If your project is over 50 thousand dollars in size and you don’t have a contractor you use regularly it would be wise to pay a contractor for a constructability review. A few hundred dollars could save you thousands down the road. Furthermore it may be wise to pay a consultant for a price estimation on the plans. Often times contractors will submit very different prices. However after choosing the less expensive option a customer can find out that a major scope of work was left out and that cheaper option was actually more expensive and less experienced! Lastly if you are a landlord or other type of non end user you have greater simplicity and flexibility. Most tenants prefer core building features such as electrical systems and high security doors to be functioning. They would also typically prefer a credit for the cost of painting the building to do with as they please than to have the building painted.

 

Secondly is the quality of the work. This is a double edged sword as I will explain. Frequently customers will focus on an end product with little concern for sustainability. For example installing an expensive tile over a terrible substrate. The install will look poor and will fail very soon only to be redone at a greater cost. It would have been better to pay twice as much for a job that would last 10 times as long. Or building an expensive new office around a failing electrical or plumbing system. In these examples the customer will achieve short term results but will pay a far greater cost in the long term. The other side of this is putting too much money into something that nobody cares about. To rehash the tile example someone once paid soco construction to install a very expensive tile in a not so great warehouse office despite our suggestion of a sealed concrete floor. The tenants moved in and filled the office with boxes and furniture and there it sits completely covered up. Frequently fixtures and finishes used by tenants will be quickly worn down. Time and time again customers request expensive commercial toilet paper dispensers and paper towel dispensers. But after the lease is expired I come back to find them all broken and the paper products resting on the fixtures. Why not install the simpler cheaper and more attractive versions? For most people they just don’t know any better.

Lastly is when and how fast. Unfortunately the best time to invest in your building is also the best time not to invest in your building. When rents are high and opportunity seems abundant contractors are busy and expensive. When work is slow for contractors it benefits both you and the contractor to keep a steady work flow. Prices are lower and availability is better. However it is during these times that you can frequently make good investments in other property or the the stock market for example. Don’t just invest in your property without thinking. If your money can be put to use elsewhere do it. Wait until the timing is right. Also there is a certain value to be had by planning ahead. Many people will wait till the last minute to contact someone about their project. Then they will set moronic bid dates that squeeze everyone’s time or make unreasonable deadline for finishing the project and therefore drive up the price. Now obviously, there may be other financial circumstances driving these decisions. But countless times customers call and ask for some arbitrary work to be done right away or in a meeting a group of corporate executives will sit there and talk about the project for 3 months and they pay through the nose during the 3 months of construction timeline as everything is rushed to the job instead of working themselves harder to make decisions in the first month and give the contractor 5 months. It benefits the customer to call early and ask the contractor for a price and let them know there are no major time constraints.

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