Unrelated: residential and commercial real estate 🏘️

Yurt, studio-apartment, mansion, mid-century split level…whatever. Most of us are lucky enough to have somewhere to call home. 🏠 That means that everyone comes to the table with a varying level of real estate knowledge. Have you rented an apartment? Bought a house? Binge watched House Hunters on HGTV (who hasn’t?) If that’s the case, you’ve brushed up against the residential real estate world.

So many people who come to us eager to start a business want to transpose their residential knowledge into this new commercial context.

I'm here today to break down why you should leave your residential baggage at home when searching for retail space.

Here are a few of the biggies we hear again and again:

I want to sign a one year lease because that’s how I’ve always rented my apartments
Wait, you’re not a member of the MLS? How do you look for spaces?
When I bought my house my agent showed me 16 places. Why are we only looking at three?
What!? I have to fix and/or replace the HVAC if it breaks?
I sold my house in two days. Why would it take six months to LEASE a space?
I broke the lease in my apartment once and they just took my security deposit. What happens if I break my lease once I open my brewery?

Most of these questions fall into a few categories that we’ll translate into commercial real estate terms and break down below ⬇️

Lease Term: The average commercial lease is five to ten years. That's a much bigger commitment than leasing an apartment. If you tell a retail leasing agent you’d like a one year lease so you can “try out” your concept, don't expect to get any calls returned.

Zillow: We know y'all LOVE Zillow, but there’s really no equivalent in retail leasing. Yes, Loopnet is a thing, but the info is often outdated. Besides the square footage and obligatory leasing flyer, there isn’t much to ohhhh and ahhhh over. The good stuff happens through broker-to-broker listing sites like Costar and the strength of your broker's own network. For better or worse, a subscription to CoStar is definitely not free the way Zillow is, so even if you wanted to, you likely won't have access on your own.

"Triple Net" Leases: When you rent an apartment you just expect to pay your rent and utilities, right? When you lease a commercial space, most often you’re signing a NNN "triple net" lease which means you’re also paying your portion of the landlord's property taxes, insurance, and common areas maintenance (think trash pickup, landscaping, and shared outdoor space). Oh yeah, you’re also obligated to keep the place up and running: maintaining the HVAC, addressing plumbing issues, etc.

Inventory: The number of available retail spaces on the market varies wildly. A quick search for retail spaces in Charlotte, NC yielded a result of 44. Yikes! What are the chances any of these match your criteria? When we looked at Zillow for the same geographic footprint, we had 1,374 places to fantasize about. Wow! Thats crazy!

Timeline: lack of inventory combined with proper business planning and the ping-ponging of negotiations is why leasing a retail space can take foreeeeeever. You can walk into a residential leasing office or respond to an ad on Craigslist (ummm, be careful!) and have a place to live pretty quickly.

So even though you likely have plenty experience with residential real estate, unless you're equally versed in commercial transactions, it's wise to have a great broker on your side.