Unless you haven’t been paying attention to the news lately, you definitely know that the US economy has been quite slow on the uptake. This is due to the Wall Street collapse during the subprime mortgage crisis that found thousands of families without homes. Frankly, you would think that the amount of foreclosures across the nation would give pause to anyone considering spending money on real estate, but some companies found ways to add value to their property without buying new space.
The New York Times has a very interesting piece about the tactic that some building owners across the city have been taking in the brutal real estate market – upgrade properties now instead of buying new properties:
“It was the looming threat of a lease expiration that would open up 200,000 square feet of space occupied by UBS and other tenants that persuaded the owners of 535 Madison Avenue to invest in the building’s first major upgrades in more than two decades. That the wager, at a cost of more than $5 million, was made in 2009 at the depths of the market only made it riskier.
But with lobby, elevator and electrical renovations now complete at the 37-story office tower, the building’s owners say the bet is already paying off. Since last year, more than half of the 200,000 square feet UBS vacated has been leased, with much of the common space spruced up just as the Manhattan office leasing market begins to show signs of improvement.”
The updates have actually proven to work out in terms of higher rental rates and lease rates as well for the building owners. Hypothetically, when the other buildings begin to renovate after the economy settles, these buildings will have the most attention in a red hot leasing market. Using these funds, the owners can then move onto buying new properties. Pretty brilliant, right?