By Mel Schultz Commercial Properties, Budget Analysis budget, forecasting

Mastering Budget Projections for Commercial Properties

Mastering budget projections for your commercial portfolio helps you manage your properties more smoothly and enjoy long-term profitability. Savvy commercial property owners and their managers leverage technology, stay on top of market trends, and proactively manage expenses by reviewing data and sticking to a strategic plan. Here are eight ways you can improve your budget projection skills and improve profitability this year.

1. Understand Budget Basics

Mastering Budget Projections: Key Strategies for Success

A commercial property budget contains several important components. Tracking these components will help you understand where your money comes from and where you are spending it. A commercial property budget should include the following items:

Operating expenses, such as maintenance, utilities, landscaping, security, and insurance.
Capital expenditures, including large-scale improvements such as roof replacements, structural repairs, and HVAC upgrades.
Revenue streams, such as rent, parking fees, advertising, and other services you offer.
Reserves for contingencies, including funds for emergency repairs and legal fees.

2. Leverage Historical Data

If you have data from prior years, leverage it to find trends and patterns in your revenue and spending. This can help you establish more realistic baselines for future budget projections. Consider reviewing seasonal variations in utility costs or maintenance, historical occupancy rates for your buildings and how they impact revenue, and trends in vendor pricing.

3. Monitor Market Trends

Local real estate and economic data can give you a picture of where your market is headed. When Clarity Commercial works with clients on budget projections, we take a close look at market trends. We consider economic factors such as interest rates, inflation, and property tax changes as well as the local competition’s rental rates and amenities. Last, we take a look at what tenants are demanding from their spaces. All of these factors contribute to local market trends and should be considered when making budget projections.

4. Implement Financial Technology

Property management software and other financial tools can automate calculations, generate reports, and offer you real-time insights into your portfolio. We use technology that empowers us to automate expense tracking, forecast different models, and integrate our accounting software so our financial records are accurate.

5. Anticipate Occupancy Fluctuations

Any good budget projection anticipates fluctuation in occupancy rates, as occupancy rates directly affect your revenue. We recommend most budget projections include a healthy vacancy buffer to cover potential downtime. Your list of expenses should also include marketing and tenant retention efforts.

6. Include Maintenance Expenses

Sometimes, we see property owners plan for major capital improvements in their budgets, but neglect to include costs for regular maintenance. However, including regular maintenance costs in your budget projections can save you money in the long run, as maintenance can avoid costly big repairs down the road. Be sure routine inspections for your buildings’ systems are included in your budget, as well as snow removal and landscaping.

7. Adjust Your Budget Dynamically

Budget projections are predictions, not actual reality. That’s why it pays to review your projections regularly and make adjustments. We conduct quarterly budget reviews to stay on top of changing market conditions, react to a changing economy, and to uncover opportunities to renegotiate vendor contracts.

8. Communicate Your Budget Goals

Whether they are your property manager, your spouse, your business partner, or investors, you need to communicate your budget goals and budget projection with the key stakeholders in your portfolio. This will ensure that everyone is working together toward your goal for your properties. Budget projections take time and experience to master. The Clarity Commercial team has expertise and years of experience helping our clients make plans for their properties and increase their profitability. Contact our team today to learn how we can help you master budget projections

For more information or to request a free estimate, visit their website at https://myclaritycommercial.com/ or give us a call at (952) 370-224-2699.

Affiliations & Credentials: We are proud members of IREM, CCIM and MNCAR along with various professional organizations, and hold relevant certifications in the real estate management field. Our affiliations and credentials demonstrate our commitment to excellence and our ongoing efforts to stay up-to-date with industry best practices.

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March 26, 2024

By Mel Schultz Commercial Properties, Commercial Property Management budget, leasing, maintenance, Property Management, tenants

Attract New Tenants with These 5 Alternative Uses for Vacant Commercial Space

If you’re struggling to fill vacant commercial building alternative uses this year, you’re not alone. Many commercial property owners are finding it challenging to attract traditional tenants for their offices, retail, industry, and other space.

To survive in a hard market, it is important to think outside the box. Here are a few alternative uses for vacant commercial space that could help you land your next loyal tenant.

Commercial Building Alternative Uses

1. Life Science Labs

Life science companies require a mix of office and laboratory space. If you’re willing to work with the tenant on the build-out, your vacant office space may be the perfect future home a biotechnology, food processing, or medical device firm. Your existing building may be a more attractive option to the right company than ground-up new construction.

2. Medtail

In a similar vein, your retail space may be the ideal home for a new medical office. The medtail model puts outpatient services in a retail setting. Not only is this convenient for consumers, it can open up an entire new tenant market for you. Medtail build-outs are relatively straightforward, and the new tenant may attract other medical businesses to your property.

3. Eatertainment

It’s eating. It’s entertainment. It’s eatertainment. The Twin Cities is home to several eatertainment venues (think CanCan Wonderland in St. Paul or Punch Bowl Social in the West End). If you have a big space to fill, a tenant that plans to combine a restaurant or bar with sports, music, or other social activities might be the perfect fit.

4. Glamping

If you have vacant land in a rural area that is awaiting development, consider marketing your property to potential glamping tenants. Glamping, or glamorous camping, is an increasingly popular way for non-outdoorsy people to enjoy the outdoors. Your acreage may be the ideal spot to attract vacationers.

5. Pickleball

Pickleball was 2023’s fastest-growing sport in the United States, so why not capitalize on the trend? Pickleball courts are popping up in empty big-box stores and other properties with tens of thousands of square feet. This is a great opportunity for commercial real estate owners looking to repurpose their vacant spaces.

For those who are unfamiliar, pickleball is a racquet sport that combines elements of tennis, badminton, and ping pong. It can be played both indoors and outdoors on a smaller court than traditional tennis, making it accessible for all ages and skill levels. The game’s popularity has exploded in recent years due to its ease of play and social nature.

With the rise in demand for pickleball courts, Commercial Building Alternative Uses owners are taking advantage of this trend by converting unused spaces into dedicated pickleball facilities. These spaces can range from empty storefronts to large warehouse buildings – as long as there is enough space to fit the necessary dimensions of a pickleball court.

For businesses looking to attract more customers or provide additional amenities for their tenants, adding a pickleball court can be a smart investment. Not only does it offer a unique and fun activity for patrons and residents, but it also presents opportunities for hosting events and tournaments that can bring in revenue.

Pickleball courts can also be a valuable addition to hotels and resorts, providing guests with another form of entertainment during their stay. They can even be used as an attraction for corporate team-building activities or family gatherings.

If you’re struggling to attract tenants, Clarity Commercial is here to help. Our property managers can help you market your portfolio and find the ideal tenant, even if they are outside the box. Contact Us Clarity Commercial today for expert property management advice.

For more information or to request a free estimate, visit their website at https://myclaritycommercial.com/ or give us a call at (952) 370-224-2699.

Affiliations & Credentials: We are proud members of IREM, CCIM and MNCAR along with various professional organizations and hold relevant certifications in the real estate management field. Our affiliations and credentials demonstrate our commitment to excellence and our ongoing efforts to stay up-to-date with industry best practices.

June 21, 2021

By Mel Schultz Budget Analysis budget, commercial real estate, portfolio

Building Your Real Estate Portfolio Budget

Any successful commercial real estate owner will tell you a real estate portfolio budget is absolutely essential for scaling your investments. Not only does a budget help you understand how much you make and spend each month, it can help you plan improvements to your properties to increase revenue in the future. It can also reveal when you are ready to make your next property investment.

If you’re just starting to build your real estate portfolio budget or your current budget needs an update, here are a few tips from the commercial real estate professionals at Clarity Commercial.

Real Estate Portfolio: Establish Your Portfolio’s Goals

Your budget is about more than numbers. It’s a vehicle to help you achieve your goals. Before you create your portfolio budget, consider what your 1-year, 3-year, and 5-year goals are. Do you want to increase revenue by 15 percent? Complete a major renovation? Purchase a new property? Whatever your goals are, you want to build your budget to meet them.

Start with Your Expenses

Take some time to gather and list all of the expenses associated with your properties, then include them in your real estate portfolio budget. Include maintenance, repairs, management, legal, staff, utilities, mortgages, and insurance costs. Don’t forget to calculate your vacancy costs as expenses, either. Vacant spaces cost you money each month and filling them should be your top priority.

Then Establish Your Revenue Targets

Once you have a grasp on your monthly expenses, you will have an idea of the amount of revenue you must bring in each month to break even or make a profit. If your current portfolio is covering your expenses, great! What else could you do to maximize revenue? If your current portfolio does not cover your expenses, work with a property management company to work out a plan for getting back into the black.

Put Your Profit to Work

If your portfolio is making a profit each month, think about how you want to reinvest that profit back into your portfolio. Are there capital improvements you need to make to your existing properties to attract future tenants? Perhaps there is a property you’d like to add to your portfolio. Your budget can help you forecast these future expenses and manage your profit so you’ll have the funds to achieve your goals.

If creating a budget for your real estate portfolio sounds intimidating, get in touch with Clarity Commercial. We’re experts in commercial real estate budgeting and forecasting. We can help you get a grasp on your expenses and revenue and plan for future investments. Contact us to learn how we can help you.

For more information or to request a free estimate, visit their website at https://myclaritycommercial.com/ or give us a call at (952) 370-224-2699.

Affiliations & Credentials: We are proud members of IREM, CCIM and MNCAR along with various professional organizations and hold relevant certifications in the real estate management field. Our affiliations and credentials demonstrate our commitment to excellence and our ongoing efforts to stay up-to-date with industry best practices.

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Clearly Better Commercial

Real Estate Portfolio

March 23, 2020

By Mel Schultz Commercial Property Management budget, financial, projection

Building a Realistic Budget Projection for Your Commercial Properties

Commercial Property Management in Minnesota
Budget Projection

A Note on COVID-19

The Clarity Commercial team is watching the COVID-19 pandemic closely and is following all guidelines from the CDC and the State of Minnesota. Our team is stepping up hand hygiene and practicing social distancing to help slow down the spread of the virus and ensure we are healthy and able to serve you and your properties through the pandemic.

You have a portfolio of properties, but do you have a sense of the income you generate from these properties over the course of a month or a year? How about your expenses? If an unforeseen expense pops up at your property, can your budget handle it? A budget projection answers all of these questions and helps you maintain a healthy and successful commercial property portfolio.

How Budget Projections Help You Manage Your Commercial Properties

Creating a budget projection for your portfolio of properties will help you work toward your financial goals. Most property owners have a sense of the revenue their properties bring in as well as the monthly cost to manage those properties. A budget projection puts concrete numbers to every income stream and expense over a 12-month period. Not only does this give you a more accurate understanding of the health of your portfolio, it provides milestones for you to hit as you work toward your financial goals.

Budget projections help you anticipate and mitigate problems that may arise later in the year. You can use the data from current and past months to manage loss of income or extra expenses down the road. Your budget projection may help you identify the best time to complete a building improvement or step up your marketing.

Use a Current Year or Rolling 12-Month Budget Projection

Budget projections should cover a 12-month period. Some property owners choose to project over a calendar or fiscal year (January to December or July to June, for example), while others choose to use a rolling 12-month model. Use your leasing calendar to decide which model will work best for you. Whatever model you choose, update the data monthly so you have a clear idea of the health of your portfolio and your projections stay accurate and realistic.

Include a Cash Forecast

A cash forecast is one element of a budget projection. Rather than income, a cash forecast projects your portfolio’s cash flow. Cash forecasts are extremely helpful in budgeting for maintenance, improvements, and unforeseen expenses. Some property owners break down cash forecasts weekly rather than monthly for an accurate look at cash flow for a particular month.

Consider Adding a 3- to 5-Year Outlook

While budget projections are most useful if they look at 12-month period, it can be helpful to use your budget projections to forecast a three- to five-year outlook. While you can’t predict the future, you can take an educated guess at your portfolio’s outlook based on past performance, market trends, and the strength of the economy. Thinking three to five years ahead can help you plan strategically and develop long-term financial goals for your portfolio.

Budget projections are an essential part of managing a successful commercial property portfolio. Clarity Commercial can help you put together a projection that helps you understand your revenue streams, expenses, and make a plan for future growth.

For help creating a budget projection for your portfolio, contact Clarity Commercial today.

For more information or to request a free estimate, visit their website at https://myclaritycommercial.com/ or give us a call at (952) 370-224-2699.

Tag: budget

Mastering Budget Projections for Commercial Properties

1. Understand Budget Basics

Mastering Budget Projections: Key Strategies for Success

2. Leverage Historical Data

3. Monitor Market Trends

4. Implement Financial Technology

5. Anticipate Occupancy Fluctuations

6. Include Maintenance Expenses

7. Adjust Your Budget Dynamically

8. Communicate Your Budget Goals

Attract New Tenants with These 5 Alternative Uses for Vacant Commercial Space

Commercial Building Alternative Uses

1. Life Science Labs

2. Medtail

3. Eatertainment

4. Glamping

5. Pickleball

Building Your Real Estate Portfolio Budget

Real Estate Portfolio: Establish Your Portfolio’s Goals

Start with Your Expenses

Then Establish Your Revenue Targets

Put Your Profit to Work

Building a Realistic Budget Projection for Your Commercial Properties

How Budget Projections Help You Manage Your Commercial Properties

Use a Current Year or Rolling 12-Month Budget Projection

Include a Cash Forecast

Consider Adding a 3- to 5-Year Outlook

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