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Commercial Real Estate FAQ With S.L Van Der Zanden On Retail Properties & Special Servicers

In Terms Of Conversion, Best Use Of Retail Space – What Are The Most Popular Trends?

The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful:

When retail spaces are converted, there’s a few creative uses these properties can see. Self-storage is a big one, with customers often paying may more for renting their storage space than their property is worth. Others for big box locations may include churches, schools, trampoline parks, gyms, and paintball establishments that continue to fill the building while maybe not pulling in as much rent as a retail space would. 

Richard Wilson: In terms of conversion, I’ve seen retail spaces being converted into other uses that might be like a “best use” of that retail space, even though the initial intended use was retail. What are you seeing as kind of the most popular, or the biggest trending, repurposing of retail commercial properties right now? Through your own clientele, or from your own investment ideas. 

S.L. Van Der Zanden: So, if it’s a big box that’s been vacant that they can buy for pennies on the dollar, self-storage is a very popular reuse. Self-storage, it’s expensive to convert the building to it, but once you’re there, the dollars per square foot that people will pay in rent, they put stuff in there and they forget about it and they rent for 20 years, you know? They pay ten times the value of what they put in storage. That’s a popular re-use. The next would be churches and schools, they can take up a lot of space, they’re not top of the market rent payers – none of these uses pay as much rent as retail, but you’re talking about a property that’s already expired from a retail perspective. And then entertainment kinds of things, like paintball, and trampolines, and gyms and stuff like that that are experiential. Again, they need a lot of space, so you’re not necessarily going to get a ton per foot, but it will use the space and fill it up with people. 

Richard: Sure, sure.

About the author

Richard Wilson