It can be hard for small business owners, start-up companies and entrepreneurs to claim traditional office space in most major metropolitan cities. Traditional office space in a big city has a lot of benefits, but it can be too much (and too expensive). This is why so many small businesses are looking for smaller workspaces that represent their style and methodologies. Enter: commercial lofts.
Lofts can be found in most major cities around the world. They are typically industrial in nature and are known for their sometimes quirky and charming characteristics, such as exposed brick walls, large windows, exposed ceiling beams, and the use of wood, glass, concrete, and other natural materials. Lofts have open concept floor plans that encourage collaboration and are often used by many small businesses at the same time as a co-working space. Where lofts lack in square footage, they make up for in character, sustainability, affordability, and charm.
If you’ve been considering expanding and diversifying your real estate portfolio, here are some of the benefits for investing in small lofts in big cities:
Tenants who rent commercial property and office spaces have (usually) thought long and hard about renting out this kind of workspace. They’ve chosen this location because it works with their business, and the location is conducive to how they do business. Most of these tenants are committed to staying put for the long term, which means longer, more consistent lease terms for the landlord.
Many tenants are more than happy to sign a 2-3 year lease agreement when they find a loft in a big city that meets their needs. This benefits the investor, the landlord, and the tenants. It also reduces the risk of surprise vacancies and expensive eviction processes.
If you’ve dabbled at all in residential real estate, you’re familiar with how the rent structure is set up. For residential properties, there is typically a set rate for rent based on the local market and similar comparable properties. Loft offices are different. There is a lot more flexibility when it comes to how much you can charge for rent for commercial lofts.
While residential leases are protected by rent control laws, commercial lofts do not have to follow the same guidelines. Landlords and investors have the freedom to discount the rent in the beginning to draw new tenants in, and offer a “get your feet on the ground period” and then slowly increase the rent over time.
Investing in an office loft means you can include a ratchet clause which means the rent will increase by a predetermined percentage each year.
Commercial tenants looking for office space are looking for a space that reflects their style, company mission, and business profile. Most tenants will be willing to put money and effort into improving a commercial space so it is a better reflection of their business and meets their everyday needs.
This means if a tenant wants to upgrade the space to better serve them, for example by painting or performing other minor structural upgrades, they’ll be willing to do it on their dime. This is a win-win for everyone, because the tenants have the creative freedom to create a space that works for them, and landlords and investors do not have to foot the entire bill for these renovations and improvements.
While working remotely and working at home is on the rise right now, people will go back to working in traditional office spaces. Eventually, small companies, entrepreneurs, and startups will be looking for affordable workspaces in major cities to get their businesses back up and running. They’ll want a space that is affordable, cohesive for collaboration and co-working, and close to the heart of the city. They’ll be looking for lofts.
Investing in small lofts in big cities not only helps to expand and diversify your real estate portfolio but can also help to maximize ROI and generate significant rental income. Our mission is to give you as much information about real estate investing as possible so you can make confident and informed business decisions.
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