Retail vs. Office Space – Which Commercial Property to Rent?
You want to know the difference between retail vs. office space and are ready to lease the correct property for your business.
Can retail space be used for office?
Can I use office space for retail?
What is the difference between commercial and retail property?
In this article, we will answer these questions and more. Keep reading to compare retail vs. office space before you sign a lease.
In 2020, there were nearly 32 million small businesses in the U.S. While it was a tumultuous year for some, many survived and even thrived. In fact, businesses with fewer than 20 employees added 1.1 million new jobs in the US, and those with 100-499 employees added nearly 250,000 new jobs. Between job creation and providing vital goods and services, it is fair to say that small businesses have been and will continue to be the lifeblood of the American economy.
In a digital-first world, many small companies are grappling with decisions of where to conduct business. The reality is, having a retail space or office space is transformational for the productivity and efficiency of a company. The Gensler Institute found that only 12% of workers in the U.S. wanted to work from home full-time. For small businesses that sell goods or services, the choice often comes down to what type of space: retail space vs. office space.
Which you choose will impact the day-to-day operations of your small business. Unsure? Read on to learn the differences, the primary features to look for, FAQs and important tips to follow before you sign a lease.
Looking for a commercial space in Texas? Hartman provides exceptional service for small business owners to lease office space or retail space in Houston, San Antonio, Dallas and beyond. Contact us to learn more.
The Differences Between Retail vs. Office Space That You Should Know Before Signing a Lease
Retail and office spaces are similar, but meet different business needs. Any consideration for a commercial space should start with the end in mind: what are your goals and daily requirements? There are more options available now than ever, so really dig into what you need, the daily rhythms of your business, the kind of customers or clients you host, and how you want traffic to flow.
Here are the basic differences between retail vs. office spaces:
|Space Type||Retail Spaces||Office Spaces|
|Number of Parking Spaces||More than number of employees||Similar to number of employees|
|Price per square foot||Higher||Lower|
|Lease term||2-5 years, on average||As short as 1 month and up to 10 years+|
|Commonly used for||Retailers in the food, clothing, beauty, technology, and other similar industry services||Medical, insurance, legal, real estate, and other similar industry services|
Again, you can revisit your business goals to determine whether things like high foot traffic, visible signage or being in a quiet building matter to your daily operations. Small businesses especially need to leverage these factors to maximize the benefit they gain from their chosen space. Let’s take a look in more detail.
What Retail Space Means and Common Features of Retail Space
The priorities of a small business that operates in the retail sector are unique. Here are the features to consider:
Foot traffic – Retail businesses do best when they’re in a prime location. First, consider how convenient the retail space is. Is it near other stores? Could it be another stop in someone’s errands? This will make it easier for customers to drop in, which is an ideal situation for a small business owner. Proximity to other, non-competing stores or restaurants may also be ideal.
Parking – When looking for a retail space for rent, don’t forget to check out parking. In Houston, Texas shopping centers should typically provide a parking ratio of 4 parking spaces per 1,000 square feet of Gross Floor Area (GFA). Depending on how urban or suburban the environment, many of your target customers will be driving to your store. They need somewhere easy to park, and they aren’t going to want to circle around waiting for a spot.
Visibility – If you’ve ever filled out a “how did you hear about us?” survey, you know that signage still matters. We all notice and recognize signs. People are conditioned to look for places they want to patronize. As a small business owner, visibility should be a high priority, and retail spaces are typically set up to accommodate that.
Accessibility – Ensuring that your location is accessible for anyone with any level of ability or limitation is, of course, important. But being accessible for as many people as possible, in general, is also key. One of the perks of a retail space is that you will probably be located on main thoroughfares and roads.
Price per square foot – Because retail properties are meant to generate revenue, rent may be a little higher than an office space. Of course, all of this is factored into your overhead either way but you may shell out more per square foot for a retail space than you would for an office.
5 Examples of Retails Spaces in Texas with Pictures
Need to picture it? Here are some examples of Hartman retail spaces in Houston:
1. Chelsea Square Shopping Center is a mixed-use, single level shopping center in a prime location.
2. Haute Harwin Fashion Center is an outstanding building located on a high-traffic road in the Fashion District.
3. Northeast Square Shopping Center is a pad site located in 23,000 square feet of land.
4. One Mason Plaza Shopping Center has three buildings and a steady flow of traffic, offering up great curb appeal and unique signage.
5. Mission Bend Shopping Center gets great traffic from the Southwest corner of Bellaire Blvd. and has major retail tenants.
If you are unsure whether retail is the right option, it is worth considering what office space has to offer.
When Should You Rent an Office Space and What to Look for When Renting Office Space
Office spaces can offer some things that retail spaces cannot. Comparatively, here are some of the features you get in an office:
Foot traffic – Whether you offer highly specialized services or don’t meet with customers at all in-person, an office space can have low foot-traffic. The value of this is that it is quiet and provides an uninterrupted daily workflow.
Parking – In an office, you will probably have fewer parking spots than you would in a retail building. Because you pay for spaces, if you don’t need the parking that comes with a retail space, you may save money in an office.
Visibility – Offices are typically on campuses, in buildings or otherwise “off the beaten path,” at least relative to retail buildings. As commercial spaces go, they are less visible and may have minimal signage. While you can still post a logo, or be added to a menu, you won’t have the same level of visibility as a retail store.
Accessibility – An office should be accessible but may span multiple floors, have narrow hallways or be segmented into cubicles. Your office building may be further away from major roads or highways.
Price per square foot – The average price per square foot for an office building is slightly lower than a retail building. There will probably be less wear and tear and you may sign a longer lease in exchange for a lower monthly payment.
When you are considering whether to rent office space for your small business, it is helpful to envision what these types of commercial buildings are like.
5 Examples of Office Spaces in Texas with Pictures
Here are some examples of Hartman office spaces in Houston, Dallas, and San Antonio:
1. Bent Tree Green is a three-story, Class B property right off the Dallas North Tollway. It has two atriums and a beautiful, modern exterior.
2. Commercial Plaza Hillcrest is a commercial office campus on ten beautifully landscaped acres of land.
3. Ashford Crossing II is a six-story, top tier Class B property located conveniently between the Energy Corridor and Westchase. This location offers easy access to major freeways and is in close proximity to some of Houston’s most popular and high-end hotels, retail, and entertainment venues, including CityCentre.
4. Gateway Tower is 15 stories of top-tier office property right off the LBJ Freeway and full of the latest improvements and modern amenities.
5. Spectrum is a 10-story, highly visible Class A office building conveniently located 3 miles from San Antonio International Airport. This property is near to hotels, bars and shopping destinations that are easily accessible by car or on foot within minutes.
As you can see, an office space for your small business doesn’t just mean a traditional environment. You can find offices for rent with plenty of modern amenities, as well as ones that work for managing goods and inventory.
12 Common Questions About Renting Retail vs. Office Space: Read These FAQs Before Signing a Lease
As the owner of a small business, your budget is a critical point of consideration. The money you spend each month on a lease for a commercial property is justified by the value of the space, but you should still choose wisely. Here are some of the most common questions business owners like you ask.
Can retail space be used for an office?
Commercial retail and commercial office spaces are technically two different categories, which may have different zoning requirements or use allowances. That said, using part or all of a retail space as an office is a simple adaptation. It is more common than ever for start-ups, scaleups and small businesses to enjoy all of the benefits of a storefront, even though they aren’t selling physical goods in a retail environment.
Can I use office space for retail?
Using an office space for a retail business presents a few more challenges. There may be restrictions on the nature of business you can carry out, stipulated by your lease. What’s more, the logistics of managing foot traffic and parking may be tricky. It can be done, but it may not be the easiest arrangement.
What is the difference between commercial and retail property?
“Commercial properties” is the larger category within which retail or office spaces fall. In other words, any space in which you do business is considered a commercial space.
Is it better to rent or buy office space?
It depends. There are pros and cons to leasing versus buying commercial buildings. The number one point of consideration is cost. Commercial properties are expensive, and not many small businesses will have the required capital to buy one. Owning a property also requires management and considerable financial liability. For most small business owners, renting office space is the preferable option.
How much does it cost to build out a retail space?
One piece of good news for small businesses is that most leases allow you to do some customization to your retail or office space. How much it costs depends entirely on how much you are changing. Full building renovations can be hundreds of thousands of dollars. Small tweaks can be a few thousand dollars. For Hartman retail properties, the tenant improvement allowance ranges on average from $10 – $20 per square foot.
How is retail space rent calculated?
Typically, you will see retail space rental broken down in $/SF/year. This means a dollar amount per square foot for a year. Knowing the price per square foot is how you will compare rental properties. Here is a calculation to illustrate:
At $20 per square foot, a 1,000 square foot space would cost $20,000 a year.
What is the usable versus rentable square footage?
Usable square feet (USF) is the total usable floor area of a building. It is measured from the outside of exterior walls and windows and also includes interior walls, hallways, and common areas. Rentable square footage (RSF) is the amount of space that determines a tenant’s rent. It is expanded from the leasable square footage to also include common areas. Learn more about usable vs. rentable square footage.
How do small businesses get retail space?
Small business owners are big idea people. It takes some real business structures to turn those ideas into revenue. To lease any small business property, you’ll go through similar steps: the first is to calculate the space you need, search for a property, negotiate business and lease terms, and build the space. How long it takes to lease a property depends on how each of those steps play out, but the same scenario applies to any commercial property.
How much does it cost to rent a workspace?
As an out-of-the-box alternative to long-term leases, some small businesses put their teams up in workspaces. These can be longer-term than a hot desk but shorter than a traditional lease. Prices vary significantly by area, but an average of price per square foot for office rentals in metropolitan areas like Houston can start at $28.34.
Can I live in a rented office space?
Whether or not you can live in a rented office space comes down to zoning and the terms of your lease. Landlords will have different rules about this. Some commercial properties can be used for residential purposes. However, if the property excludes residential use, it is illegal to live there. If this is something you want to do, you will need to get a lease that specifically allows it.
Is there an AirBnB for office space?
AirBnB is awesome if you want a weekend mountain getaway or some fun in the sun. But what about office space on AirBnB? First, AirBnB does not specifically offer commercial properties for rent. There are some properties on the platform that have office areas, but they are residential. Some lookalike startups have gotten off the ground that mimic the approach. These include Sharedesk, Hubble, Pivotdesk, Heydesk and Croissant.
How do you get a small office space?
Many start-ups or scaleups quickly outgrow a coworking environment. When you need a small office, you can usually find a way to rent a portion of a building, rather than the whole building itself. This can be achieved by contacting a leasing agent. An agent can help you tour properties and once you find a suitable space, help you negotiate lease terms.
5 Important Tips for Renting Your First Retail Space
If your small business is growing, here are some important features to look for in a retail space:
1. Pick the perfect location – Remember that the success of your retail location really does depend on location. If you have a shortlist of options, choose the one that is centrally located, close to major roads, easy to get in and out of, and near other stops for customers.
2. Make it functional – Do an end-to-end analysis of the customer experience and make your space as easy to navigate as possible. This includes in-store signs, displays, shelves, racks, seating and more. Also consider the non-physical aspects, like ambient music and all-important WiFi connectivity.
3. Optimize traffic flow and floor plan – When it comes to customization, invest strategically in the layout and traffic flow of your retail location. You may think it is a no-brainer, but the best layout is one that never occurs to customers: it is simply set up to make their experience as straightforward and pleasant as possible.
4. Make it beautiful – As a small business, you are competing with big brands. Just as much as you have invested in your online presence and digital assets, invest in what your store looks like inside. Increasingly, customers choose in-person retail because of the experience. Be sure the experience is a positive and appealing one.
5. Maintain outdoor spaces and curb appeal – A retail location should be invitational. This begins from the street: how does your retail space look from outside, and on the outside? Don’t forget to work on the building facade, landscaping, walkways and other outdoor components that you or your landlord may need to keep up.
5 Important Tips for Renting Your First Office Space
If you are ready to get the most out of an office space for your small business, here are some important tips to keep in mind:
1. Pick the right type of office – High rise? One-floor? Cubicles? Office layouts have changed, especially with heightened focus on health and safety. Consider carefully what kind of office you want, how many private offices you need, how much shared space, and other elements to pick the right office type for your small business.
2. Leverage amenities – You want to get the most for your money, so consider any and all amenities that may be included in your office lease. For instance, you may get free access to a lobby or shared conference room. Perhaps you can negotiate more parking spaces with another business. Put feelers out and take care of all of the logistics before you move in.
3. Put your best foot forward – An office tells the world that your small business is a serious endeavor. Enjoy that. Decorate to impress and take advantage of having a visible representation of your brand to everyone who comes and goes.
4. Be organized and structured – While you may be excited to sign a lease for a new office, do not forget that you will need to use the space day in and day out. Consider all aspects of operations, and all of the roles of team members. Where people are placed and what types of arrangements are made will impact productivity.
5. Maximize networking opportunities – Your new office gives you a place to meet face-to-face with clients and colleagues. While you may have an entire building to yourself, you may also share it with other businesses. Take advantage of every new opportunity to network on behalf of your small business.
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Now that you have an idea of the differences between retail vs. office space and what kind of property your business needs, it is time to take action.
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Throughout Texas, Hartman REIT enjoys the distinction of being a trusted landlord for office and retail space. When you’re ready to accelerate growth, choosing between retail vs. office space is critical. Contact us to learn more.
About the author:
Sarah Hoopes is Marketing Coordinator at Hartman Income REIT. She is a graduate of Utah Valley University with a Bachelor’s degree in Marketing and Business Management.