Everything seems to be changing these days—the way we communicate, the way we talk, the way we do business—so it’s no wonder real estate is evolving, too. Commercial real estate markets are arguably undergoing the most drastic transformation thanks to the rise in online shopping. Since we deal with transactions day in and day out, we’re at the forefront of today’s trends. Here’s what we’re seeing lately:
More Mixed Use
In major cities, the whole work/live/play theme has been predominant for years. Now, as the need for grand commercial spaces like shopping malls is declining, this concept is spreading into more town centers and suburbs. While some shoppers still prefer brick-and-mortar retailers, a majority of them are diverting their business online. They’ll still pop into the store for a last-minute need, but developers are expanding their sights beyond this one main use.
With a decrease in retail space, the real estate market can incorporate businesses that were previously separate from other commercial properties. For example, you might see one complex that’s mostly shops on the bottom level, with maybe a doctor’s office or urgent care center in the mix. Plus, a gym or spa on the second level—next to available office space, of course. To top it all off, you have apartments for rent on the upper levels. So, if you choose to live there, you have everything at your back door.
Think about how your town is currently situated. Are the medical/dental facilities isolated from the rest of the businesses? Do you have residential space above your local shops? How many empty commercial buildings do you have? Remember how it looks now, because that could all be changing soon. While it may involve some specific zoning, many communities are more receptive to mixed use developments than they once were. After all, it’s all about conserving land and space. Plus, with experienced real estate attorneys on your side, it shouldn’t be a problem.
People aren’t just changing how they shop these days; they’re also looking at transportation a little differently. Car sales are on the decline, while ride-sharing services, like Uber and Lyft, are booming! Plus, many cities are working on increasing their options for public transportation. Whether this trend is a response to environmental concerns or traffic, it means we won’t need as much parking in the future.
Again, it’s all about minimizing unused space, so huge empty parking lots, garages, and decks will need to be repurposed. For new developments, many places are already reducing the number of parking spaces required per square foot. However, they need to make way for the new ride-sharing trend. More accessible pick up/drop off locations are essential for commercial real estate that wants to stand the test of time. The primary challenge you’ll face is balancing the needs of current consumers while also avoiding the need for major renovations in the future. Fortunately, you can rely on our expert advice when creating proposals and finalizing your next transaction.
In the past, real estate was driven by long-term, dependable leases. With the rapidly-changing environment we now find ourselves in, those are becoming harder and harder to come by. Have you heard of a pop-up? They’ve been popular for a while in large cities like New York, D.C. or L.A. They allow innovative start-ups to try out a location with short-term leases and drive foot traffic to other businesses in the area. If you’re open to these possibilities in the future, you’ll be better insulated against fluctuations in the retail market, as well as other industries.
The concept of “percentage rent” also needs a little reevaluation. In the past, many stores have paid their rent as a percentage of their average sales. Unfortunately, these numbers are often skewed by people buying items online and trying to return them in-store. Some retailers carry only a small inventory these days and instead focus on customer service with options like personal shopping and/or in-store pick up and try on. With sales increasingly flowing through online channels, this may not be a sustainable model for very much longer. If you’re willing to renegotiate your lease agreements with prospective tenants, you’ll have a much stronger base of renters for the future. You just may be restricted in what terms you can offer pending bank approval, but we can help you with this, too.
The key to progress is adaptability—especially when it comes to commercial real estate. These are just a few of the trends we’ve noticed recently, but there are undoubtedly many more changes ahead. Be prepared by having a team of qualified real estate attorneys on your side, like our staff at the Law Offices of Kirk Halpin & Associates, P.A. With our expertise, you can meet the growing needs of today’s consumers, as well as future prospects.