Senvesco Real Estate Financial Services

Retail Buildings

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.

These are:

Shopping Centers

Shopping Centers

A group of stores catering to a trade area that offers a variety of goods and/or services and on-site parking A good tenants mix is must.

• Super regional center—has three or more major department stores, is often enclosed such as 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.

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.

Strip Commercial

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

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 is 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?