Retail properties can range from a single, one-tenant building to over a million square feet of assorted shops that display goods or sell services to the public. Explore the three types of retail properties and tips about buying or leasing these properties:

Shopping Centers
A group of stores catering to a trade area that offers a variety of goods and/or services and on-site parking (the tenant "mix"):
  • Super regional center-has three or more major department stores, is often enclosed (mall), is 750,000 to 1 million square feet, and draws from a large trade area of 12 miles or more.
  • Regional center-has one or two department stores, a variety of smaller stores, and is larger than 300,000 square feet. It will draw from an eight-mile radius or more.
  • Community center-usually has a supermarket, junior department store, and a variety store, is larger than 100,000 square feet, and draws from a three- to five-mile radius.
  • Neighborhood center-is built around a supermarket and/or drugstore, provides convenience goods and services to a neighborhood, is 30,000-100,000 square feet, and draws from a one- to three-mile radius.
  • Convenience center-is a small cluster of stores along a street, 5,000-40,000 square feet; trade area is the immediate neighborhood. May have a convenience market, laundromat, dry cleaner, etc.
  • Specialty center-often has a theme, usually has no anchor tenant, and generally is local in influence. Examples might be home-improvement centers, gift shops, or auto service and sales.

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Freestanding Store
One commercial building meant to be occupied by a single user. It is typically found near major shopping centers on major routes, and fills a specific need in the area.

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Strip Commercial
A string of stores in a commercial area with no central leasing, management, or theme.

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Things to Consider Before Leasing or Buying
  • Improvement allowances-The landlord budgets for carpeting, tile, bathrooms, etc.; additions to basic leased area. This allowance is sometimes called "T.I." (tenant improvements).
  • Location-traffic counts, ease of access to store, convenience to shoppers.
  • Cost of occupancy-expense pass-through, improvements, insurance, etc.
  • Overall draw of customers to center-Does center have a steady stream of shoppers?
  • Demographics-Are goods or services attractive to people in the trade area?
  • Effectiveness of management-Does the landlord respond to complaints or suggestions?
  • Parking availability-Is there adequate parking for customers?

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Primary Concerns for Buyers
  • Physical condition of property-Is the price adjusted to reflect the condition of physical plant?
  • Net income generated by leases-What is left after expenses of operation are paid?
  • Occupancy level and tenant mix-Are there vacant ("dark") spaces? Are tenants attracting shoppers?
  • Stability of tenants-What is the turnover rate? How long have tenants occupied the center?
  • Upside potential in income-Are rents under market? Do leases escalate to keep pace with inflation?
  • Protection from large increases in operating expenses-Tenants share in expense increases; physical condition of center is good without deferred maintenance.
  • Area growth patterns-Is area gaining or losing population? Will new competition emerge?

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