Keeping Maintenance Costs Down
For commercial real estate professionals whom are either consultants or on building management teams, keeping building maintenance costs low is vitally important. As you know, upkeep of buildings can dramatically effect an asset’s revenue goals for the year. So this being said, we’re going to discuss a few ways you may consider to lower your property costs:
- First, though it may seem obvious, set up a realistic maintenance budget for the year. Here’s a few ideas to achieve that: You can use the 50% Rule, this sets aside half the annual property rent to pay for maintenance. Or you can apply the 1% rule, which takes 1% of the property value and applies that dollar amount to your repairs for the year. And finally, the square footage rule. This goes by the standard $1/sf per year. Keep in mind, you do not have to spend all this capital of course, but these methods will ensure your expenditures are covered.
- For larger projects that may turn out to be costlier than budgeted, a popular idea is to break the project up into 2-3 phases. Perhaps it’s time to replace a couple of roofs, or update some HVAC systems. If you don’t have the capital up- front, split up the project over a couple of years until everything is completed. We work with a management company who does this for many of their larger capital projects, and it has worked very well over the years. This method keeps you on budget for the year, but at the same time, you continue to service and upgrade your property.
- Maintain a robust network of contractors. (Shameless plug: see connexproperty.com to find new vendors). Quite a few management companies I work with have a solid core of contractors that they rely on to get their properties serviced. By establishing good relationships with these professionals, you can often get prompt service at competitive rates. It’s the idea of volume-based pricing. The more work you can give a vendor the more favorable pricing will be. There’s one caveat here. Every once in a while, you are going to want to go outside your network and get projects priced by other vendors. This way you can ensure your preferred contractors are keeping their pricing in step with the general market.
- Energy Consumption Savings is key. Upgrading the lighting system is one of the most impactful ways to save energy in a commercial building. Simply switching to energy-efficient LED bulbs can significantly reduce electricity usage. HVAC systems typically account for 50% of a commercial building’s energy consumption. Implementing energy-saving measures for HVAC systems can lead to substantial energy savings. Also consider enhancing the building envelope, which includes the walls, roof, windows, and insulation. By sealing air leaks, adding insulation, and improving the efficiency of windows and doors, a commercial building can prevent unwanted heat transfer and maintain a more consistent indoor temperature.
In conclusion, these are some of our thoughts on Keeping Building Maintenance Costs Down. If you have any questions, certainly do not hesitate to reach out. We love helping anyone in commercial construction or property management!