What Is Next for Retail Space After the Pandemic?
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Vaccines, social distancing, and masks have all contributed to the slowdown of the pandemic. This has given business owners new hope in terms of recapturing revenue, opening up industries, and ensuring that business is back.
One area deeply affected by the pandemic is retail. Shoppers not only stayed home, but they turned their spending to the Internet in order to fulfill their shopping needs. Discretionary spending still happened, but shoppers expressed a deep need to be safe and stay at home as much as possible.
Retail space is a prime source of opportunity for real estate investors looking to begin diversifying their portfolio, as well as those that just want to snag the next great opportunity. There are strong reasons for seeking out retail space for rent.
Best Tips for Evaluating Retail Space for Rent
If you’re going to look into retail space, there are a few points to consider. The worst thing you can do is assume that all retail space for rent is the exact same, and therefore forgo your due diligence and examinations of agreement details.
Here’s what to do, instead:
- Look at the total cost, not just the rent. While rent is important, the total expenses definitely play a role in whether a space is going to be profitable for the tenant, not just the landlord.
- Think about the purpose you have for your dream space. Do you need multiple exits? What about the ability to have a kitchen in the space? Your purpose for the retail space will determine a great deal, so look carefully at each listing.
- Who is handling the repairs? Ultimately, this will be in the lease agreement, but some listings do show what expenses are expected from the tenant, usually in the form of a single-net, double-net, or triple-net lease.
Getting someone else to look over your dream listing isn’t a bad idea. Some commercial tenants run everything past a commercial real estate attorney just to ensure they aren’t biting off too much in terms of rent and responsibilities.
Building the Right Lease Agreement
The best lease agreement, contrary to popular belief, is really a dialog between the landlord and the tenant. As the tenant, it’ll be up to you to look carefully over any lease agreement. While the landlord will ultimately put beneficial terms for themselves into the agreement, that doesn’t mean that you have no recourse. You can always negotiate the agreement in full, including when rent is first due.
Think about it from the right perspective: the landlord wants to get a long-term tenant because they have to spend money to market the space to new tenants. If they can work out good terms with you, then they don’t have to spend as much money on marketing. They can save that money for improving the space, handling repairs, and also making renovations that will increase the building’s value.
Converting a Lease Agreement into an Option to Buy
This isn’t as common as it was in previous times, but the right property in the best location for your business could turn into an investment property. If you’re looking at possibly buying commercial property in the next few years, let the landlord know that you would like an option to buy the property.
Buying options are interesting, as they do not mean that you’re obligated to buy the property, and the landlord certainly isn’t obligated to sell you a property. Ideally, the option simply allows both parties to have the option for another real estate transaction if terms are favorable.
The best options to buy have the following characteristics:
- Right of first refusal: this would give the tenant the ability to make an offer on the property before the landlord markets the property to other investors.
- Transparency: there are clear terms on when the option to buy is available, such as after a number of successful payments from the tenant.
- The amount of rent credited towards the purchase is directly in the agreement.
Pay close attention to your available retail space options and their details to see if you have a solid buy option on your hands.
Retail Space for Rent Goes Beyond Just the Rent
Finding the right retail space for rent is only the beginning. It’s important to look at the vision that you have for your retail space of choice. What does it need to look like in order to be as profitable as possible? Rent is only one part of the equation, and it becomes a smaller piece of the puzzle once you establish a profitable space.
Your customers will demand plenty of your attention, but starting with the right space makes all of the difference in the world between a retail center that doesn’t get enough foot traffic and one that continues to grow dramatically over time. Look at what you need to do to make your space as enticing as possible.
Handling Repairs and Renovations
All spaces will eventually need repair, so it’s essential to set aside funds for that purpose. Even if you have a very new space, every tenant will bring their own needs. Both parties need to work out who pays for what within the terms of the lease agreement. All requests are referenced against the lease agreement, with zero exceptions.
That said, most tenants will expect the landlord to handle major repairs, which is why they’re focusing on renting the space instead of just buying their own property. However, most landlords will expect commercial renters to have the ability to maintain the space that they rent to some degree.
You will still want to leave plenty of cash available to handle routine repairs that the landlord will not rush in to cover. For example, a clogged toilet is something that the tenant will most likely deal with, but a plumbing system rotted by tree branches is something that the landlord would handle.
Leverage the Recovering Market with the Right Space
Examining retail space opportunities is a wise decision. Consumers are looking for experiences that are far away from home since they’ve had to quarantine for so long. By looking at post-pandemic opportunities in the retail space, you’re building chances to really take advantage of current market conditions while still providing consumers with great deals.
Browse & List Retail Space for Rent for Free on MyEListing.com!
You can browse and list retail space for rent for free right here on myelisting.com. Sign up for an account to receive access to accurate market intelligence and customized property type alerts.
Other recent articles
Article Search
Share
All Article Categories
