Jason Cohen of Nexus Real Estate in Pittsburgh serves as Head of Operations for the company and contributes to several publications covering the CRE market. One of the services offered by Nexus is property repositioning, but what does that mean exactly? Jason Cohen explains in the article that follows.
The real estate market is never the same year to year.
Jason Cohen of Nexus Real Estate explains that interest rates change. The needs of homebuyers in specific markets shift. Retailers open and close and open again. Buildings quickly become outdated even with regular maintenance.
What is necessary and desirable in real estate is frequently redefined.
How do real estate investors and homeowners keep up? Enter property repositioning.
Also known as real estate asset repositioning, Jason Cohen of Nexus Real Estate says property repositioning broadly refers to making capital improvements or renovations strategically on real estate to make them more viable to a marketplace or redefines their place in a changing real estate market.
Property repositioning takes changes in market cycles and makes it beneficial for real estate investors, whether it’s a family home or a company office space. Individual homeowners, landlords, and international investors frequently use property repositioning, especially when the real estate market is booming.
Repositioning adds value to property owned by a range of investors, according to Jason Cohen of Nexus Real Estate in Pittsburgh, but it can be particularly valuable when used as a tool to protect multifamily apartment or home assets.
How Does Property Repositioning Work?
Jason Cohen of Nexus Real Estate reports that property repositioning can be used to transform existing real estate assets but is also an important factor in a strategic acquisition. Investors will look in an area for an undervalued property or one that is in a high-traffic area. Sometimes the area is expected to rise in value, such as a site near a new business or a revamped downtown.
Value targeting often comes first in the broader strategy of property repositioning. Market timing comes into play as well. Those focused on property repositing will take their time to find the very best real estate deal.
They weigh options, explore locations, and do a detailed analysis of expected value growth. Many real estate experts say that investors looking for a property will likely make one deal out of every hundred that is proposed.
A lot goes into finding the right property within repositioning says Jason Cohen of Nexus Real Estate. Some properties are just not worth the investment — the area might be on the downturn or repairs are too expensive to make repositioning work effectively.
Sometimes there are major structural changes or the type of property has proven itself obsolete.
Location is a big factor. Jason Cohen of Nexus Real Estate in Pittsburgh explains that investors tend to gobble up properties for repositioning that are close to their home or office, making it easier to oversee development or renovations. They may also consult with local brokers and agents to get the skinny on what areas or properties are undervalued and are ready to grow in value and which are not worth their time.
What are the Benefits of Property Repositioning?
Jason Cohen of Nexus Real Estate says for starters, increased cash flow. Landlords may launch asset repositioning to raise rents.
Investors and property owners may also find that the price of utilities tied to a certain property needs to be reined in. They make dedicate time and money to creating more energy-efficient spaces or transforming an entire property into a green building.
Often, that energy efficiency is tied to the desires of renters or homebuyers in certain areas of the country. Making a home energy efficient may often come with tax dedications for building owners.
Jason Cohen of Nexus Real Estate explains that often a property owner finds that the original purpose of the building is now unpopular and outdated. An area that was once perfect for office space is now better positioned to accommodate rental units or single-family homes.
A business may build a headquarters in one spot, so an investor may decide to turn a home into a business space to take advantage of increased foot traffic.
Taste in design and décor also fluctuates decade to decade (or even year-to-year). Jason Cohen of Nexus Real Estate says a home or building once considered modern and attractive can be viewed in quite the opposite way over the years. Improving the aesthetics of buildings is another major motivator behind property repositioning.
This could mean changing the façade, but also reinvesting in common areas, lighting, flooring, fixtures, and paint. It could mean making the building more accommodating to a larger population. A thoughtful redesign can work wonders on an investor’s bottom line.
Following Commercial Real Estate Trends
Have you ever seen an office building and thought that it could make a nice condominium? How about an outdated and in disrepair small home that you could envision becoming a bar or restaurant?
Jason Cohen of Nexus Real Estate says such repurposing efforts are increasingly behind property repositioning. What was once a staid dentist office in a booming historic downtown can typically be scooped up for cheap and turned into anything from a shared workspace to a wine shop. Multi-floor office spaces can be turned into department stores and vice versa.
With property repositioning it all comes down to vision – and maximizing value in the easiest and quickest way possible.