If you are a retail real estate investor, you understand the importance of finding and keeping a retail tenant. However, much of today’s retail business is moving online and out of local brick-and-mortar spaces due to changes in consumers’ purchasing preferences. Therefore, it is vital to your investment portfolio that you observe and modify your retail projects to meet today’s demands. These are some changes you should be aware of.
Spaces With Multiple Uses
If you walk into a grocery store, Walmart or other large retail space, you should expect to see multiple purposes integrated into the space. For example, you may find a bank branch, eye center, pharmacy, trinket shop and other small goods and service providers. Some even offer restaurants, gyms, movie theaters and office spaces. Many of these larger spaces have become mixed-use spaces.
Whether you are new to retail property investments or you have properties that may be struggling with turnover, consider adapting your space for multiple uses. Carefully study the neighborhood and community and learn what commercial spaces are needed. Then, modify your property to meet these needs. You may also search out new, untested avenues, such as incorporating medical facilities, massage studios, hair salons or other service providers into your retail space. This encourages your customers to visit your location for multiple reasons, which helps every business on your property.
Variable Lease Terms
As you review the local community, look for seasonal and other short-term opportunities. For example, you may not be able to find long-term tenants for specific spaces, but can you offer business owners short-term leases for things like Christmas stores and costume shops? If you have incorporated restaurant space into your retail location, you may promote popup restaurants, where local chefs or prospective chefs can lease the space for a few days or a week. If your location consistently offers something new, your customers will keep coming back to see what your spaces have to offer.
Many of these lease payments are based on a percentage of the sales the tenants make, and if you have modified the space for different purposes, these leases can be quite profitable. However, you should work closely with an accountant and attorney so the contract terms are clear to all parties and you earn enough rental income.
Your parking needs will change based on the types of business owners you target. For example, a medical facility may not need as much parking as a large grocery store. However, with the expansion of rideshare programs, you may need larger drop-off and pickup areas. Check with your local development office for any restrictions or conditions for parking lot approvals.
To keep your retail real estate profitable, watch current local business trends and create flexibility in your properties.