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The PROPERTY DOCTORS, Sydney Australia Novak Properties
EP. 1411 Invest in Fit-Outs: Boost Property Value & Skyrocket Business Profits
Have you ever wondered why banks and popular food chains constantly update their interiors? It's not random—it's a strategic business decision that directly impacts their bottom line. In this revealing episode, we crack open the world of commercial fit-outs and why they're a non-negotiable aspect of successful business operations that few entrepreneurs adequately prepare for.
When you're moving "bodies in and out of your business all day," wear and tear accumulates faster than most realize. We share why neglecting your space can silently drive customers away, particularly in food service where environmental cues trigger subconscious judgments about quality and cleanliness. From sticky pub tables to cracked tiles harboring mold, these seemingly minor issues quietly sabotage customer confidence.
Successful fit-out strategies aren't about vanity—they're about sustainability. We reveal the startling costs (around $50,000 for a basic refresh of a small shop) and why smart business owners set aside 10-20% of their annual rent for these inevitable expenses. Through real-world examples, we demonstrate how postponing updates often leads to regret, while timely investments create multiple returns: better staff recruitment, increased customer engagement, and stronger social media presence as your space becomes naturally more photogenic.
Whether you're operating a small retail shop or managing commercial properties, this episode offers practical guidance on turning a dreaded expense into a powerful competitive advantage. Don't wait until your business environment starts turning customers away! Subscribe now and discover how proper fit-out planning can transform your business trajectory and customer experience.
You know what? Nobody talks about it. It's the fit-out. When the McDonald's does the fit-out, or when commercial properties do the fit-out, or Westfield's shops do the fit-outs, why do they do the fit-outs? Often you look at them and think what are they doing? Why are they doing this fit-out? Let's talk about fit-outs, Commercials. Stay tuned, I'm the ringleader. Michael Bergio, commercial expert. Good morning.
Speaker 2:Morning Mark. Welcome everyone to Morning Minutes, episode 1411, investing in your fit out. Spend money to make money. I think it is an aspect a lot of small businesses don't. I don't want to say value, but a lot of them don't do it, and there are many reasons. A lot of people just instantly assume they don't have the money, but we know a lot of small businesses that do have the money and they don't reinvest it into their fit out. What's your thoughts, mark?
Speaker 1:yeah, look, I think it's one of those things that people don't realize but say you've got, you know, your rent. You've sort of got to put an extra, maybe 10% of your rent or 20% of your rent on top for that day when it comes for that fit out. So it seems like it's a a good business, it seems like it's a cost of any good business and no one really talks about it. You know, like, where does the money come from? Do they lend it? Do they use it? From profits? Do they put it away every year? Um, but you know, you look at, you look at westfields, for example fresh, always looking fresh. All the business just shuts down, you know. So what happens is, you know, you just see the business disappear. You think that business was actually doing all right. I don't understand. Often they, they have a mandatory fit out where westfield has in their leases that after five years they've got a eight years, seven years, whatever it is.
Speaker 2:They've got to do this big fit out and these businesses sometimes just can't afford it yeah, I know when I worked atino's they had the same thing I think it was five years had to redo the fit-out. But once it was done it just brought a new, fresh appeal with customers coming into the store. You've got customers who are intrigued when it initially is closed down because they're thinking, oh, there's a new business going in there, and then it's like no, they're staying. It's a new business going in there, and then it's like no, they're staying, it's a new fit out, let's go check it out.
Speaker 2:Um, but I remember a clear example was a chinese restaurant I used to go to and they hadn't done the fit out in 20 years. And I know in the last sort of five years they were contemplating a relocation or do they reinvest. But so they, they didn't. Well, they therefore they didn't do anything to the fit out and it just got worse and worse. They ended up changing locations and doing a new fit out. And the first thing he said to me was I wish we did this in our old premises. The just the work environment was a lot better and also the customers appreciated it and all made comment on it.
Speaker 1:So it just recruiting yeah, recruiting as well it's easy to attract better staff, you know when you, when it's looking good, but it really is a drain on these businesses and I find the bigger the business, the bigger the businesses, the better the discipline is. With the fit outs. Um, it's a, not negotiable, it's a, it's a mandatory, it's a, just, it's got to be done. Um, and you know what, at the end of the day, um, people look, we're on that threshold as well as our, our agency. So our agency was done. What nine years ago ago now did a lovely fit out. And then we're just going through now and you know, repainting the whole place, recarpeting the whole place. It just, you know, and you don't realise, once it's done, the conference room's being redone. Once it's done, then it's like, oh, this feels good, but it really hurts. It really hurts.
Speaker 2:And I think, especially even from a landlord, having the standards of the external of the building done, I think where you've got to have a real broader view, because a landlord will go well, if I paint the building, do this, how much extra rent will I get for my shops? And it's not necessarily like okay, instead of $800 a square metre you're going to get $850. So over two years it's a 30% return REI. It can sometimes be like, instead of a shop taking six months to lease, you're going to lease it in one month because all these businesses want to be in this nicer-looking building and instead of tenants failing after a year, the business is going to do better because more customers come to the building, because it looks nicer and they've and they're walking the kids around, it's more pleasant. So businesses do better. So it's not necessarily a better rate per square metre initially, because you're getting value in ways you don't expect it.
Speaker 2:It's similar like billboard marketing. You put a billboard up and your phone starts ringing. You're like, well, did it come from the billboard or did it come from that letterbox, or was it that call or was it everything? And it's the same with the business. Is it having the nice fit out. Is it the post on social which looks amazing because you have a good shop fit out? Because if you've got an old, run-down interior, you're not really posting photos of inside. Customers are not taking photos.
Speaker 1:No, and it's a lot of wear and tear. You know when you're moving bodies in and out of your business all day, every day, it's really a lot of wear and tear on. You know when you're, when you're moving bodies in and out of your business all day, every day, it's really a lot of wear and tear on. You know tiles, carpet. You know um cabinetry. It really gets, you know, chipped and broken. And you know bathrooms up.
Speaker 2:You know stuff like that mark let's give the example of your macau owner, just quickly. It just reminded me. The hotel gentleman, the stories, the chairs.
Speaker 1:Mate, we, I remember the, a good friend of mine, frederick Louis Vecito.
Speaker 1:He was running the, he was running the Crown in Sydney and we went to visit him in Macau and he, we were looking, you know, he would be looking down like at a chair and then there's like on one of the chairs there's like a little sort of cut or slash, wear mark, and you know, to change, in an expensive restaurant to change chairs can be 50 grand and they would go through and change 200 chairs when one chair had that little mark on it and it was just like you know, I on it, and it was just like you know. I guess it's programmed maintenance, do you know what I mean? Where, where people would look at the chairs being thrown out. You know, you know perfectly good chairs thrown out and it's like no, no, this is just the programmed maintenance that has to get done on these properties. But to give people a typical example, michael, what would they spend on a refit or a refresher? So say, like a, can you think of a typical business and a?
Speaker 2:typical refresher fit out Just like a 60 square metre shop, which could be a physio, could be a restaurant, just a 60 square metre shop. You would be least looking at $50,000 because when you think of a refresher, that could be new floors, new ceiling and painting all the external walls. Lighting, lighting upgrades Light and lighting, so there could be definitely.
Speaker 1:That's a hell of a lot of money. That's just it could be cheap. Yeah.
Speaker 2:Yeah, it's almost a year's rent. A 60 square metre shop would be potentially, say, $50,000 a year. So but if you're looking at over five years' timeframe, you're putting away 10% of what you pay in rent to save to reinvest back into their shop. And obviously retail and food would be a lot more, because you've got more tables, more chairs.
Speaker 1:Have you seen any examples? Do it well with these fit-outs where it's sort of so it's not potentially growing business, it's business. It's also potentially sustaining business. That's being done.
Speaker 2:The banks, the layouts, they do it.
Speaker 1:Yeah, banks are always doing it.
Speaker 2:Yeah.
Speaker 1:The banks are always doing these fit-outs. You're thinking what was wrong with the old one? Bang, it all gets redone overnight.
Speaker 2:Overnight Domino's. As I said, they do it very well. Trying to think of a and then another example of co-working spaces.
Speaker 1:Rosamund Gomez is always looking fresh.
Speaker 2:Yep Co-working spaces, because they've got a company. Yeah, I don't think Subway's ever changed.
Speaker 1:Well, there's an example for you. There's an example for you, I find for you, I, I find, and look, I don't mean to um knock around subway, but there's an example for you. I've seen some scrappy um subway stores whereas like, yeah, guys, you need to invest. I think, particularly if you're in food, there's more sensitivity around looking looking fresh with your fit out.
Speaker 2:Definitely, Because people will judge if you've got dirty tables and chairs, cracks all in the tile which can get mould. You're like my food is being prepared in this premises.
Speaker 1:What's at the plate that I can't see? You know, when I go to a pub and you lean on the table and it's sticky, yes. And then the lady comes and on the table and it's sticky, yes. And then the lady comes and cleans the table and it's still sticky and you're like, yeah, no, not good.
Speaker 2:Yeah, so food's definitely. A food industry is very sensitive towards it and I think those costs will go up. But it's one of those things. You don't want to be spending all this money on marketing to have the customer walk through your doors and go that place looks disgusting, doesn't matter if it's the best food, you'll lose them. So I think what you said is key at the beginning, when you're doing your expenses, you've got to have an extra tab which is to walk like not contingency but renovation and you're saving 5% a week or whatever it is, because it is a big cost but it's a hell of a lot cheaper than finding a new location, thinking that's the answer.
Speaker 1:Or starting a new business.
Speaker 2:Yeah, exactly, or starting again.
Speaker 1:Well, there you go, guys. That is the cost of business. You need to be putting 10% or 20% away, probably of your rent for a fit-out of your businesses. Officers you may get a 10-year tenure. Food premises you'll probably get about a 5 to 7-year tenure, and that's why these cats out there are always spending money on their fit-outs to stay fresh. Banks Banks is a great example. I love that Birch thank you have a great day. Good luck on the elections. What's going to happen on the elections tomorrow?
Speaker 2:uh, lots of voting, or you get what's the fine? 90. Let's hope we don't forget doing all our opens. I know I've done it before, I'm forgotten, so I think you can go early today even okay, okay, all right but I I think what, just quickly on that there weren't any big drastic policy changes to really affect the property market. I know there's some tweaks in super but overall I think if you're an owner or a buyer should serve the confidence to see property, make your offers and proceed Big time.
Speaker 1:I think it's the key message Big time. Have a great day, thank you. See you Bye.