Retail Space vs. Office Space- Which Do you Need?

June 3, 2014

There are three kinds of commercial property: office, industrial, and retail. Each type of space is unique and offers different features to the tenant. Also, each type offers a different yield on investment. These yields depend on your location, type of business, and different economic factors. For the purpose of this post, we will focus on the difference between office and retail space, and how to determine which one you need.
 

Retail Space

Retail space is highly sought after because of the foot traffic; it generally costs more per square foot than office space. Typically, there is an “anchor” store, like a grocery store, and then smaller stores next to it or maybe in a building adjacent. Negotiating a retail contract to get the exact space you want can be difficult. The store closest to the anchor gets the most foot traffic, so securing that unit is a challenge.

When looking for retail space, you want to pay close attention to certain features that directly affect the consumer’s experience with your store:
 

  • Parking spaces: Are there enough for the amount of visitors you get?
  • Accessibility: Is the store easy to get to even if it’s off of a busy street?
  • Visibility: Is there a marquee? If so, what does it take to get your logo on it? If not, how will you market the store so people know you’re there?

 

All of these things will contribute to your success or demise. For many retail stores, it is all about the location! Most retail stores won’t succeed in a business park, unless you are willing to pour more money into advertising. One of the major perks of leasing (or buying) retail space in a designated retail park is the foot traffic and convenience to visitors.
 

Office Space

Traditional office space is a little less expensive per square foot than retail space because there is less risk involved. Office leases are longer and tenants are more likely to renew. Office spaces are great for companies that need space for offices, cubicles, a reception area, public restrooms, etc. Business parks are usually conveniently located for commuters and employees. You might choose an office space because of the many restaurants nearby or the close access to the freeway.

Some businesses might consider leasing office space rather than retail space because of the money factor. There are other things that must be considered before you make this decision:
 

  • How much of your business depends on foot traffic?
  • If you move locations, how will you make it known to your customers?
  • Is it an extra drive or less convenient location for your customers?
  • For your line of business, does it matter what type of space you’re in?

 

Some industries, like healthcare, can work in office parks or retail parks because people typically don’t frequent these locations for the convenience. You either need to see a dentist or need to go to the doctor and needs will always trump convenient locations. Normally, people won’t decide to see a healthcare professional solely on the fact that they are located right next to their favorite nail salon. However, people will make decisions about what grocery store to frequent based on other shopping near there.
 

How to Decide

After reading this post, you may already know what type of space your company needs, but if not, consult a real estate professional to guide you through the process. A local will know about the different economic factors that could play into your decision. Someone who is familiar with the market may also know about lesser known spots or up-and-coming locations for your business that you haven’t considered before. In the end, you will make the right decision as long as you’ve weighed the pros and cons and discussed the options with your other partners.