I can’t believe that other landowners/property owners haven’t figured out how to repurpose their retail space to live-work-play-make spaces, all at grade.
There is demand for these types of spaces from gigpreneurs who, for example, want to work in a street-facing studio and live behind their store, all on one level (ie, the ground floor).
Thee types of uses are more resilient than, say, a lady’s dress shop or a men’s shoe store. Yet in a recent Bloomberg article (https://www.dropbox.com/s/loq42xd8mhw8y5n/how-retail-is-surviving-the-pandemic-bloomberg-2021-jan-11.pdf?dl=0), landlords are cutting deals to keep retail tenants alive, tenants are asking governments for more and more help and, at least from what I can tell, no one is talking about moving towards a more sustainable set of uses… that are:
b) internet-resistant (or they know how to take advantage of an online presence) and
c) big box store-resistant.
I was also surprised when a clever investor asked me to answer this question—which is more profitable, residential microsuites at grade or commercial space—and it turned out that per sq ft, microsuites were.
Here’s my analysis for a project I am working on in Belleville ON:
A 300 sq ft microsuite will probably rent for $1,100 per month or around $44 per sq ft per year gross.
Conventional commercial/retail space is anywhere from $16 to $24 per sq ft triple net in downtown Belleville, which works out to around $31 to $39 per sq ft gross (assuming OPEX—property taxes, operating costs and utilities—are approximately $15 per sq ft per year). That is, if you can find a retailer that is interested in renting anything these days and if they have a sustainable business model.
So, somewhat surprisingly (at least to me), residential might be a bit more $$$ per sq ft with a lower risk of long-term vacancy.
Here’s our architect’s sketch of how we might demise our ground-floor space–
Commercial space along Belleville’s main street right now is about 20 to 25% vacant. Some stores have been left empty for two years or more. That is a long time to wait if you a landlord. And I suspect residential is less than 2%.
So, live-work-make-play at grade is good for tenants and residents, good for their guests, visitors, clients and customers, good for passersby, good for the neighborhood, city and town (not to have gaping holes in their street-life, that is, vacant stores that look like a hockey player with few teeth left) and, happily, good for a landlord’s bottom line too.
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