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Because the retail market is changing, commercial real estate investors might find it difficult to secure long-term tenants for their rental properties. If you are having trouble filling your retail space, there are a few inventive alternatives that can help you gain the maximum from your investment.
While the retail real estate market is clearly difficult, clever investors can still make the most of their assets. Consider thinking outside the box to maximize your earnings if you are having trouble monetizing your unused space. Even in today’s digital market, brick-and-mortar retail still requires a location to operate!
That is where pop-up stores come into place. Instead of housing a single retail tenant, pop-up stores allow for the quick set-up and tear down of limited time or seasonal vendors.
So, if you want to learn more about how to finance pop=up stores and why many commercial lenders are beginning to warm up to the idea of financing pop-up stores, click the link below to book a free strategy call with us at LendCity.
Introducing pop-up stores
Commercial real estate investors are increasingly considering retail pop-up businesses, especially during the busy Christmas and summer months.
You can take advantage of e-commerce retailers’ demand for more physical visibility by offering your property a temporary operations location. More crucially, because pop-up shops are temporary, you may charge a premium for your area.
You can earn rental income and increase the property’s worth by demonstrating a flourishing, busy environment at your investment property. A lively retail atmosphere may also help to energize nearby properties and raise neighborhood real estate prices.
Increasing the value of unused store space
While monetizing retail real estate is more complex than ever, experienced investors find new ways to make money. Here’s how investors are leveraging transient demand to extract long-term value from assets that could otherwise go unused:
Pop-up stores
E-commerce has dominated the global retail sector for the past decade. However, it does not rule out any possibility of in-person transactions. Many online sellers are seeing the value of having a physical location. As a result, several online merchants invest in short-term retail pop-up stores to introduce their product ranges to new customers. You can take advantage of the new retail industry by leasing your facilities as pop-up stores.
Retail event rentals
Some businesses may want to have a physical presence without going through the hassles and costs of setting up and staffing pop-up stores. Instead, they may arrange a one-time or limited-time retail event. You might rent out your storage space for one-time events where brands can show off new products or meet with potential customers on a more personal basis.
Gallery space
You do not have to sell anything in your retail area. In reality, art is increasingly being shown in underutilized retail spaces. Consider working with a local arts organization if you are searching for a unique strategy to increase foot traffic to your building. Existing tenants in another storefront will most likely profit from the addition of a gallery.
Subdividing the available area
Another innovative technique to create income from your commercial real estate is to subdivide your retail space into smaller micro-storefronts. Many small businesses may be hesitant to take on the financial burden of covering the rent for an entire storefront. However, by subdividing the area, you may be able to attract first-time entrepreneurial tenants searching for a modest, personal space to establish their business.
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What is the best way to lease to pop-up stores?
You should consider several things regarding the lease structure and terms if you’re thinking about leasing your retail space to a pop-up shop maker. Most pop-up stores rely on short-term site licenses rather than typical commercial real estate leases.
When allowing pop-up stores to set up shop in your empty retail space, here are a few things to bear in mind:
License or lease- which one is better?
While considering renting out your space to a pop-up shop, you should know the difference between a lease and a license. Unlike a lease, a long-term arrangement, a license is a one-time agreement that allows a tenant to use your property for a limited time. Utilities and other services are maintained by the property owner rather than the lessee under a license.
Examine any current loans or leases
Examine your mortgage documentation before starting into negotiations with a pop-up shop owner because you are issuing a license rather than a lease. Some mortgages expressly prohibit you from renting out your home for a short period. Consult a real estate attorney in case of any questions regarding the terms of your mortgage. You should also have a look at any existing leases at your property. It is possible that you will not be able to lease space to a competitor.
Maintain systems properly
Pop-up stores must open quickly, which means they do not have time to do things like assessing the condition of your electrical, ventilation, and plumbing systems. This means they must accept the property “as-is” under the terms of the license agreement. As a result, they rely on you to ensure that your property is well-maintained and that they will not run into any unavoidable issues during their license.
Take another look at the retail industry
It is impossible to overlook the strength and importance of pop-up retail businesses in today’s retail market. Licensing some or all your available space to a pop-up store may be the way to go if you’re searching for a strategy to monetize unused space and start reaping the rewards on your commercial real estate investment.
Before you initiate renting out your property temporarily, make sure you follow all prevailing laws and regulations, as well as the requests of any long-term tenants you may have. Staying in compliance with your mortgage and any applicable zoning rules will protect you from fines and costs. Keeping existing renters satisfied also means continuing to profit from the rental income they generate.
Catering to the pop-up shop segment of retail is a terrific niche choice for filling commercial space if your property mortgage and existing lease agreements are in good standing. Licensing your area as a pop-up shop can be a great way to make extra revenue while also stimulating the local retail scene.
So, if you are ready to start pursuing pop-up stores as part of your real estate investment strategy, we want to help you. All you need to do to get started with us is click the link below to book your free strategy call today.