What are the best retail tenant types for commercial property investors? Well, there’s a large variety of retail tenants available but only a small segment make fantastic tenants. That is to say, take good care of the property, pay rent on-time, every time, and typically sign long-term leases. In other words, just about every single positive characteristic a commercial property owner investor could ever ask for. Of course, this strongly implies there are less-than-desirable retail tenants. So, we’ll also touch on those. But first, let’s take a look at the advantages of retail property investments.
Retail Property Investment Benefits
Income potential definitely leads the list because the average annual return in relation to the purchase price ranges from 6 to 12 percent. By comparison, residential single family properties return 1 to 4 percent, tops. Another advantage is there’s a professional relationship in-place. It’s a B2B relationship rather than a B2C or personal relationship.
Investing in commercial real estate properties may be a great idea, especially for those investors who want steady cash flow and stable income. But to succeed, you must first understand the complex factors of investing in a commercial property, along with financing options, property control, and lease options. —Westwood Net Lease Advisors
Yet another benefit is retail tenants inherently care about maintaining their storefronts. If they aren’t proactive and also perform routine maintenance, their businesses suffer. Additionally, retail tenants follow limited hours of operation. Which means they are generally open during the day and then close up shop at night. All of this, not to mention the fact that retail tenants expect to commit to long-term leases.
Best Retail Tenant Types for Property Investors
Now, there are a number of potential retail tenants. But, which are the best ones for commercial property investors? Let’s begin with a couple which do make for good tenants but aren’t the most ideal. For instance, independent, niche retail shops and independent restaurants. While a good number will work out fine, these two have the highest risk of failure. But, what are the top retail tenant types for property investors? Here they are:
- Specialty retail. Think retailers like Batteries Plus. These specialty retailers are companies which sell specialty products which are always in need and in demand.
- Health supplies. Prescription eye glasses make for one strong example. Such retailers also sell items which have a steady demand that’s not subject to the overall economy. So, they are usually really good tenants.
- Pharmacy business. Here again, another ideal retail tenant. Just like the others, this is one that’s always in-demand, no matter how the micro or macro economies perform. The best are those associated with familiar companies.
- Brand-name chain location. Brand-dame chain stores are a great fit because they have a proven track record and have support from a recognized name. These companies typically sign long-term leases and attract customers simply because of their brand offering.
If you’d like to learn more about commercial real estate investment benefits and more about the buying process, please contact me.