As we all know, inflation is something that has been a part of society ever since humans invented currency. In recent years, with record purchasing and spending habits, the rate of inflation has exploded for everything from food and clothing to cars and homes. One of the things most impacted by inflation that always creeps its way into daily conversations about the economy is real estate. Did you know that the average sale price of homes sold in the U.S was about $25,000 while nowadays it stands at roughly $385,000? That is greater than a 15X increase! In short, it’s safe to say that buying property has never been more of a hassle than it is today. This goes for individuals, families and let’s not forget, businesses.
Everyone is trying to find ways around these exorbitant prices, and for one, almost everyone now is leasing out their homes instead of purchasing them flat out as was common before. Nowadays, many are even choosing to rent out their homes to have the convenience of being able to pack up and leave at any time as well as not have to worry about luxurious utility expenses such as expensive roofing tile repair, watering the grass and/or plants. Not to mention replacing the heater and AC every couple of years because the guy who came from the company did a half-fast job since his shift was over and he wasn’t getting paid overtime.
One of the ways to save for businesses is by using office space for retail purposes. Let me explain.
What can office space be used for?
Traditionally, office spaces were used for, well, an office’s headquarters or at least a location which is created for employees to have a suitable environment to work in which is what brings profit to the company. This isn’t the same as the goal of retail which is to have the customers pay the company for its inventory and earn profit that way. The office design is obviously not a good fit for a clothing store or supermarket but just because a space is labelled as an “office space”, doesn’t mean it needs to be designed in that manner.
Office space is generally designed in a way where you have separated spaces because that is generally where the different managerial offices, boardrooms and lounge area would traditionally be. Let’s now take the example of a retail store: Winners. If Winners were to purchase a location with the layout/floor plan of an office space, they could designate these rooms to different clothing sections. For instance one would be for women’s athletic wear, another for boy’s swimwear and a third for clearance items.
What is a retail office?
A retail office is simply another term for describing a retail location or a space that you lease to sell goods to consumers. Retail real estate can either be multi-tenanted or be single-use. For instance, a single-use retail real estate may be a restaurant or a large store such as Walmart or Costco in which that whole property is classified as the retail office. In multi-tenanted real estate such as with shopping centres, malls or community centres, your shop inside of that complex is designated as your retail office.
Is commercial the same as retail?
Yes and no. Retail is actually a subcategory of commercial real estate. This is because commercial real estate is subdivided into 2 categories: industrial and retail. Commercial real estate is referring to land and/or buildings that are used to generate profit for a business as opposed to residential real estate. A retail property is designed as a property used solely for business purposes which in essence is to say only in the transferring of assets to the company. A space in which manufacturing does not occur, only selling. On the other hand, an industrial property which is also considered commercial property is the opposite with manufacturing being its sole purpose.
What is considered retail space?
This question was previously answered in the differences between a commercial property and a retail property with the importance being the fact that a retail property is used solely for the business purpose of selling merchandise rather than manufacturing it as with industrial property.
What is the incentive?
Although the question of: “Can office space be used for retail purposes?” Practicality is what really matters. Therefore, the question that will always follow is: “Why would I use office space for retail purposes?” The answer is quite simple, it’s the same answer that drives every business decision, money.
Office space has traditionally been more affordable than retail space because there’s simply less risk involved for banks, building companies and other investors. Why is it this way? Because office leases are more likely to last longer and be renewed than leases for retail property. Leasing out an office space and converting into a retail space is great saving bucks on every square foot. These types of spaces work exceptionally well for retailers that need separate spaces for an office, public restrooms and a reception area.
What about the customer experience?
The customer is always right is a popular saying in the West where manufacturers and sellers need to provide the best quality product and service to customers and if the quality isn’t up to snuff according to consumers, the business has nowhere to go. Ultimately, when leasing this type of space, you’ll naturally be concerned about the accessibility for your customers. For one, what type of traffic does your business bring in, foot traffic or more auto- based? Since office spaces generally are found close to major roads and freeways, are found in commercial districts, and may have underground parking, it may not be the best idea for businesses that rely on not making the customer commute by car such as a local diner. On the other hand, for a clothing store, high-class restaurant or more, why not?
At the end of the day, while it’s not recommended for all, leasing office space for retail purposes is certainly an option and presents an affordable financial outlook as well as unique architectural one for up incoming businesses that are being stifled by soaring real estate prices. So try out an office space today! What’s the worst that could happen?