Hidden Value: How to Spot Underperforming Commercial Properties with High Potential
Introduction
In Utah’s thriving commercial real estate market, competition for quality assets is fierce. But the most successful investors know something others overlook — not every great deal looks great at first glance. The secret? Finding the underperforming commercial property that others pass over and turning it into a value-add CRE success story.
If you’re planning to buy commercial property in Utah, knowing how to identify and evaluate these overlooked opportunities can help you build lasting wealth while outpacing market averages.
What Is an Underperforming Commercial Property?
An underperforming commercial property is one that isn’t reaching its full potential — either in rental income, occupancy, or use. Often, the issue isn’t the location or the building itself but the management, marketing, or operations behind it.
These properties are common across Salt Lake City and surrounding Utah markets, where fast growth and changing tenant demands can leave older or mismanaged buildings lagging behind.
Why Investors Should Pay Attention
Underperforming assets offer built-in investment opportunities when you know how to unlock their potential.
Here’s why they’re worth your time:
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Discounted Pricing: You can often acquire these properties below market value.
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Immediate Upside: By addressing inefficiencies — like raising rents or reducing vacancies — you can quickly boost NOI (Net Operating Income).
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Forced Appreciation: Strategic upgrades, better management, or rebranding can rapidly increase value.
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Local Demand: Salt Lake County’s continued population and job growth create strong demand for improved commercial spaces.
How to Identify an Underperforming Commercial Property
1. Below-Market Rents
Compare the property’s current rents to similar assets nearby. If rents are 10–20% below average, it’s a clear sign of underperformance — and an opportunity for repositioning.
2. High Vacancy or Short-Term Tenants
A high vacancy rate doesn’t always mean poor location; it could mean outdated marketing, unattractive lease terms, or simple neglect. Fresh branding and active outreach can often reverse this quickly.
3. Deferred Maintenance or Cosmetic Issues
Cracked asphalt, outdated signage, and worn interiors can turn off tenants — but they also create leverage for a lower purchase price. Strategic improvements often produce outsized returns.
4. Inefficient Space Use
Buildings with unused basements, excess storage, or underutilized land may support value-add CRE strategies like adding parking, subdividing units, or introducing new amenities.
5. Poor Online Visibility
Many properties in Salt Lake City’s commercial real estate market are under-marketed online. A building that’s hard to find on LoopNet or CoStar may just need a visibility boost.
Value-Add Strategies That Work
Once you’ve identified the right property, these approaches can turn an underperforming asset into a profitable investment:
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Rebrand and Modernize: New signage, paint, and updated interiors can attract stronger tenants.
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Lease-Up Campaign: Target niche users underserved in the area (medical, wellness, boutique office, etc.).
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Add New Revenue Streams: Think rooftop leases, storage rental, or EV charging stations.
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Energy Efficiency Upgrades: Reduce operating costs while appealing to sustainability-minded tenants.
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Rezone or Redevelop: If local zoning allows, repositioning for mixed-use or higher-density development can unlock substantial upside.
Local Insight: The Salt Lake Advantage
Salt Lake County’s dynamic growth and diverse economy make it a prime environment for value-add CRE investments. Older suburban office parks and retail strips near major corridors — like Fort Union Blvd, 7200 South, and State Street — are especially ripe for transformation.
As new businesses expand into the Salt Lake Valley, these repositioned spaces become increasingly valuable for both investors and owner-users.
Key Takeaway
The best opportunities in commercial real estate aren’t always the ones everyone else sees. By learning to recognize the signs of an underperforming commercial property, you can acquire assets below market, add value through improvements, and achieve long-term stability in a competitive market.
Whether you’re looking to buy commercial property in Utah or maximize your existing portfolio, the key is to see beyond the surface — and act before others do.
Ready to uncover hidden value in Utah’s commercial real estate market?
Contact Dan Rip today at www.danripcre.com to explore investment opportunities across Salt Lake City and surrounding communities.
