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Wednesday, December 3, 2014

Impact of Property Ownership


Many small businesses rent the property they use, but how many really understand the implications of who owns the property? Do you?

I am aware of two adjacent retail complexes in the same city that have very different ownership issues. In one complex (called “A”) consisting of retail and office space one person owns all the rental units. In the second complex (called “B”), each unit is individually owned, consists of retail, office and residential units and operates as a condominium.  Which of these models would you think is better for the tenant business? After all, the goal of the retail space owner is to maximize income from the space in either model.

Both models have unified rental policies for their complex, “A” because one person owns them all; “B” because there is one condo board that creates general guidelines for unit owners.

“A” gives a prospective retail tenant space options that are or may become available, sets the rent and attempts to insure compatibility among the tenants. The unit owner in “B” attempts to hold on to a prospective retail tenant for his unit only, has to compete with other units in the complex for rent, and does not pay much attention to compatibility among others in the complex. All this makes movement from space to space and landlord to landlord a way of life in “B”.

“A” makes sure the tenants understand the “rules”. “B” hopes the unit owners pass the “rules” on to the retail tenant, leading to potential confusion at best. Legal issues and closed businesses are also a result. In this case it is up to the prospective tenant to seek out the “rules” in advance and stay on top of them over time.

“A” operates like a monopoly within it’s complex, “B” is a competitive market within it’s complex.

When the economy is tough, both complexes have space available.

 
Which is better for your business?

 

Steve Koenig, SCORE Counselor


 

 

 

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