Maranatha Commercial
 
Retail Properties
 
   
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Retail Properties
Retail properties are properties that are occupied by one or more tenants and the property is utilized for retail purposes.

These properties are mostly single-story and can accommodate wide varieties of tenants: retail and service businesses, restaurants, medical services, schools, and even churches. As a result, this is the most popular type of commercial properties that investors look for. They are always in high demand as there are more buyers and few sellers.

Often, a retail property may be combined with an office building or other type of property. In this case, the value of the property will be determined by its highest and best use when considering the financing options available.

 

Retail properties typically rely on foot traffic for their profitability and are usually classified in seven different ways:

  1. Shopping/Retail Center - these centers are mostly single-story and can accommodate wide varieties of tenants: retail and service businesses, restaurant, medical, school, and even church. As a result, this is the most popular type of commercial properties that investors look for. They are always in high demand as there are more buyers and few sellers.

  2. Single-tenant Building - the advantage is you just have to work with one tenant. Some of the tenants, e.g. Costco, Home Deport, Walmart sign 10-20 year lease and guarantee with their corporate assets which could be worth billions of dollars. This makes your investment very safe.

  3. Multi-tenant Strip - the advantage of this investment is when a tenant moves out, you only lose a portion of the total income while you are looking for a new tenant. So you spread out the risks in this property. Top

  4. Anchor Tenant - such as a free standing retail strip center with an anchor tenant that is a well known commercial retail business, such as a national chain store or regional department store, strategically placed in the shopping center so as to generate the most amount of customers for all of the stores located within the shopping center.

  5. High Quality Tenant - most of them have good credits, lot of assets and promptly pay the rent when due. They often sign long term 5-30 year leases so you don't have worry about finding new tenants every year. They keep your property in good condition and sometimes even spend their own money to make it look better in order to attract the customers to the stores.

  6. Triple Net (NNN) Lease - the leases for retail centers are often in favor of the landlord. The tenants pay a base rent and reimburse the landlord for property taxes, insurance, maintenance and sometimes even property management fees. This takes away a lot of risks from you as an investor. The NNN Lease in a sense is a litmus test on whether the property is in high demand by tenants or not.

  7. Ground Lease - occasionally a retail center with ground lease is for sale. When you buy this center, you only own the improvement but not the land underneath. It could be a trophy property but you should think thrice about investing. Once the ground lease expires and the land owner refuses to extend the land lease, you own nothing! So it's easy to buy this center but very hard to sell.

Please note, only commercially-zoned properties can be eligible for commercial financing.

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