Shifting investor focus has lead to arise in investor interest in retail condos. Until recent years, retail condos were unfamiliar to many investors. Not only were they not understood by investors, but there was also very few of them. In recent years, there has been an expansion of the overall inventory of retail condos nationwide, leading to increased investor interest. Retail condos offer bottom floor space within a multifaceted building such as a mixed residential/commercial property. With the increase in inventory, investors are also now able to gain exposure into the more densely populated urban markets that they may have not had access to prior to retail condos. Many investors don’t have the capital or capacity to own an entire building in an urban location; retail condos provide investors with a way to get exposure to urban markets. More often then not, investors view retail condos as being similar to net lease assets, only at the bottom of a larger building rather than freestanding. Just as net leased properties do, retail condos can provide stable incomes and make it easier to finance the property, depending on the quality of the tenant/tenants and require little, if any management.
Banks, with respect to lending, also look very favorably on retail condos. Due to the fact that investors are merely buying the street level retail component of a building, banks are able to get a solid handle on what they were truly loaning on which can lead to more favorable loan terms.
Are retail condos a good investment you, still ask…think about the advantages of owning a retail condo and you will see the answer is, yes! Predominately located in dense urban locations with low vacancy rates due to the fact that these properties have “built in” consumers above the retail level of the property. Low to no management responsibilities, no roof responsibilities, typically NNN or NN leases where tenant pays all or most of expenses, leases usually negotiated with escalations plus a built-in consumer base due to the surrounding resident and neighborhood population all lead to why retail condos are a good investment and something that CRE investors should be adding to their portfolios.