Think Outside the Box to Find Temporary Uses for Empty Retail Space

Think Outside the Box to Find Temporary Uses for Empty Retail Space

Temporary Use of Retail Space Can Bring Additional Income to InvestorsThe fact is that the digital economy and new technology have led to closure of under-performing retail shops throughout the country. If someone currently has empty retail space, finding alternative tenants can be problematic if a commercial investor is not in a position to fund major building renovations. Consider a shorter lease term, and look to unique and creative ways to fill the space while determining a viable a long-term investment direction.

The Drawback of Commercial Investment

Commercial properties are, indeed, sensitive to market conditions, and current retail closures have become big news. There are other indicators that may lead potential investors to rethink the wisdom of expanding a portfolio of retail, warehouse of industrial properties. There are also, however, some unique opportunities to think outside the box.

Temporary uses and shared space are only two of the options available to creative investors. Some of the options hinge on local zoning regulations, but across the country, empty retail spaces have become new homes for craft artists and "pop up" farmers' markets, children's theater, tutoring facilities, family health centers, counseling services and even seasonal attractions like gift-wrapping centers and Halloween Spook Houses.

If your empty space has kitchen facilities and you are able to secure a health permit, capitalize on community need for a soup kitchen, or offer space to small bakers, sandwich makers and chefs. In cities like Dallas, small eateries that employ returning veterans and disadvantaged youth have taken hold, and not only take up formerly unoccupied space but provide jobs and training. They also garner widespread public support. In other places, urban farmers compete for indoor square footage and rooftop space for alternative gardens.

During the summer months, there is a need for space that targets out-of-school children, not for daycare but for creative activities that can include dance programs, music instruction, reading cooperatives, and rainy-day activities. Possible target tenants also might be non-profits that offer skills-building workshops, English lessons, cultural exchange programs and personal development seminars. 

Emerging Trends in Retail

There are conflicting trends on the retail scene. While the growth of online sales and overnight deliveries has contributed to a greater need for regional warehouses and distribution centers, corporate giants like Amazon are also rolling out brick and mortar facilities in select areas. If the state of retail in the current world seems to be full of ups and downs and seemingly erratic changes, that is not an unfair assessment. In markets across the country, existing malls are being demolished to make way for other development, but larger, glitzy indoor malls and "European-style" shopping villages spring up to take their place.

Although part of it may be the American penchant for planned obsolescence or simply a matter of changing demographics—current trends are not always easy to explain. Occupancy trends are difficult to project with any certainty. The economy is a factor, but so are the vagaries of the buying public, and new technology plays a distinct role.

For investors who have trouble finding long-term tenants or negotiating favorable lease terms, it is not a situation over which you necessarily have a lot of control.

Adjusting to the Times

A recent article published by Bigger Pockets illustrates compelling reasons to be wary of commercial investment. But it's meant less to discourage new investors than to point out areas of concern, and the need to enter the market with eyes wide open. 

Entitled "6 Reasons Investing in Commercial Property Might Be a Bad Idea," the author notes that the "end game" for any investor in single or multi-family real estate ought to be a move to commercial investing. 

As "controversial" as the headline might be, Engelo Rumora offers good advice on how to succeed if you read between the lines and take the warnings to heart. 

The point is that buying retail, office or industrial space is a decision that involves research to understand its peculiar limitations and potential pitfalls. Longer re-leasing times, expensive property improvements, the appeal of newer, more attractive space and the demographics that affect property value are all vital concerns. But if you're in the business of commercial investment, then you have to be open to altering your outlook to adapt to a changing economy and market.

There is potential just waiting to be seized. Throughout the country, distressed properties have become the focus of new and exciting development. Today, having an empty space is not always a bad thing. 

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