Expert: Jim Avancena, CPM - 8/6/2008

Question
Hello;

I am not positive if this is the type of question you answer or not, it is a question about what updates would be of value to future tenants / buyers in a commercial building we are trying to sell.  However with your experiance in commercial property management, I thought you might have some valuable insight.  Thanks in advance if your able to help and for your time.
We have a commercial office building that is 2400 sq ft first floor and 1600 sq ft basement.  It is in Wisconsin.  It is a brick building, build in the 1950's.  It is located on a road that has a traffic count of about 15,000 cars a day.  It is located about 3 blocks from downtown in a city of about 25,000 people that is directly attached to a much larger metro area.  There are other strip malls and office complexs that have been built in recent years within the general area, some within a block.  Most are not full and are trying to rent out space.  It is 1 block from a Macdonald's and Walgreen's.

We purchased the building almost 12 years ago, for a business we owned at the time.  We have tired to sell it on and off for the past 8 years now.  We have leased it a couple of times, but never have been able to find any stable  business to lease it to.  We have never had any serious offers on the buildings purchase at any price.  The building has been listed with 4 different commercial real estate agents, some multiple times.  It has rarely even been shown.
We have gotten to the point where we must sell the building from a financial perspective.  There is no bank involved in the transaction.
We think that the only way to sell the building is to turn it over to an auction company and allow them to sell it at any price they can.  We plan to do this soon.

The decision we are trying to make now is what repairs / updates may be worth doing to help enhance the value of the properly.  
Things we are considering include;
Parking lot repair (filling cracks / recoat blacktop)
Clean / replace carpet & flooring
Painting
Replace ceiling tiles that are stained or damaged
Other general updates.

We are having difficulty in deciding how much money it is worth putting into updates / repairs before the building is going to be auctioned.  We have asked all the realestate agents about what updates may be worth it, but have never had anyone that has really given us any helpful answers, some have just said, we will try it the way it is and see what happens.  One agent said this is a dump that will never sell no matter what you do to it.
A very similar building in the area sold for about $190K, 5 years ago.  We have listed the building as low as $100K and stated that offers are accepted.  No one has made offers.  Rarely has there even been anyone interested enough to want to see the building.  I think it is mainly due to the state of the economy as opposed to real problems with the building.

Do you have any suggestions or thoughts that might help us make a decision on what updates to do?  

Thank you in advance for any help you may be able to provide.

Answer
j-

I would not make any upgrades to your property as it stands now other than to police the grounds and get rid of any graffitti.  Most tenant users are very savvy about determining what can be done with the property.

I would put up a sign on the property that indicates the amout of net or whatever space is available on each level, the zoning of the property, and a phone number and announce it is for sale or lease.  You will have a difficult time getting brokers to help you dispose of the property because it is not large enough for them to make a significant commission.   You should indicate that "brokers are welcome" and consider making the commission significantly larger than "market" to get the various agents attention.

When you get calls on the property be certain to be prepared to "talk the talk"; be concise, correct, creative (if necessary)and supportive as long as it doesn't cost you anything.  Tell them you are sending them a brochure about the property via e-mail that contains all the essential (and accurate) lease, sale, floor plans, structrual, HVAC etc. information -so have a PROFESSINAL LOOKING brochure prepared to send via e-mail immediately.  Do not waste any agent's time or Bore ANYONE that contacts you with past anecdotes or other unrelated silly talk.  Only applicable information.

Good luck,

-Jim