Understanding Appurtenance: A Guide for CRE Investors
Terrydale Capital
Jun 19, 2024 7 Min read
Commercial real estate investing is a complex field with various factors influencing property value and return on investment. One crucial concept that can significantly impact the worth and functionality of a commercial property is appurtenance. In this blog, we will explore what appurtenance is, how commercial real estate investors can leverage it, and the benefits it offers.
What is Appurtenance in Commercial Real Estate?
Appurtenance refers to the rights, privileges, and improvements that belong to and pass with the transfer of property, but are not necessarily a physical part of the property. In simpler terms, appurtenances are the accessories or additions that come with the main property, enhancing its utility and value.
Common examples of appurtenances in commercial real estate include:
- Parking spaces: Dedicated parking spots for tenants or customers.
- Easements: Rights to use part of another property for specific purposes, such as access roads or utility lines.
- Signage rights: Permissions to place business signs in strategic locations.
- Common areas: Shared spaces like lobbies, restrooms, and recreational facilities.
- Fixtures: Permanent installations like HVAC systems, plumbing, and lighting.
How Can Commercial Real Estate Investors Take Advantage of Appurtenance?
Understanding and leveraging appurtenances can be a strategic advantage for commercial real estate investors. Here’s how:
1. Enhancing Property Value
Appurtenances can significantly enhance the value of a property. For example, a commercial building with ample parking, well-maintained common areas, and essential easements can attract higher rents and more desirable tenants. When evaluating a potential investment, consider the appurtenances that come with the property and how they can be marketed to increase its appeal.
2. Improving Tenant Satisfaction
Tenants often prioritize properties that offer additional conveniences. Providing amenities such as secure parking, efficient HVAC systems, and accessible common areas can improve tenant satisfaction and retention. Happy tenants are more likely to renew their leases, ensuring steady income for the investor.
3. Negotiating Better Deals
During property negotiations, understanding the value of appurtenances can provide leverage. Investors can negotiate for the inclusion of beneficial appurtenances or argue for a lower price if certain expected appurtenances are lacking. For instance, if a property lacks adequate parking or essential easements, it might justify a lower purchase price.
4. Maximizing Revenue Streams
Certain appurtenances can create additional revenue streams. For example, leasing out parking spaces to nearby businesses or charging for the use of common areas can generate extra income. Investors should identify and capitalize on such opportunities to boost overall profitability.
Benefits of Appurtenance for Commercial Real Estate Investors
Understanding and utilizing appurtenances offer several benefits to commercial real estate investors:
Increased Property Appeal
Properties with valuable appurtenances are more attractive to potential tenants and buyers. This increased appeal can lead to shorter vacancy periods and a competitive edge in the market.
Higher Property Value and Rent
Appurtenances add to the overall value of the property, allowing investors to command higher rents. This, in turn, increases the return on investment and the potential resale value of the property.
Enhanced Tenant Retention
Properties equipped with useful appurtenances tend to have higher tenant satisfaction rates. Happy tenants are less likely to leave, reducing turnover costs and ensuring a stable income stream.
Improved Marketability
When it comes time to sell, properties with desirable appurtenances are easier to market. They appeal to a broader range of potential buyers, often resulting in quicker sales and better prices.
Operational Efficiency
Certain appurtenances, like advanced HVAC systems or well-planned easements, can reduce operational costs. Lower maintenance and utility costs enhance overall profitability.
Conclusion
Appurtenance plays a crucial role in commercial real estate, offering numerous advantages to savvy investors. By understanding what appurtenances are and how to leverage them, investors can enhance property value, improve tenant satisfaction, and maximize revenue streams. Whether you’re negotiating a new property purchase or managing an existing portfolio, paying attention to appurtenances can provide a significant competitive edge in the commercial real estate market. When it comes to the commercial real estate sphere, having the right team behind you can make the process that much easier, and Terrydale Capital is here to help. Contact us today.
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