Not everyone knows about revenue generation, so I am going to tell you what my take on it is.
Have you ever been cleaning your family room, and looked under the cushion, and found money?
That analogy is used in commercial real estate very often.
If you look in your backyard, you will find some gems, and the value of those gems is determined by market demand.
Let’s define backyard first.
Let’s say you own a piece of property that has a building on it. For ease of definition, this piece of property is approximately 1.5 acres in size. The building uses about .5 acres and the rest is parking lot. The backyard would be considered as the parking lot in this case. Do you get it?
Now, let’s define the gems.
The gems are these little hidden pockets of value that can be taken out of the backyard. In this example, we are talking about all of that extra space within the parking lot.
For reality sakes, with the building sitting on .5 acres, that means that the parking lot is actually 1.5 acres. I do not know about you, but that is a lot of cars to park, and are that many cars going to be there all at once? Highly doubtful.
So, in all actuality you are under utilizing your property. What is most likely being used is 2/3 of the property at any given time. That leaves 1/3 untouched most of the time. That 1/3 is your gem.
What if you sold or leased that 1/3 to the likes of a pharmacy of today, or leased it to the neighbor for extra parking? There you will find your hidden money just “laying around”.
I hope this helped you determine what is meant when the commercial world talks about revenue generation when it comes to property.