By Arthur Perlen, CCIM
One of the least talked about, but most interesting, specializations of Centennial Retail Services is our work in dispositions. While we do not do an inordinate number of general listings, we are often engaged to complete portfolio-level, programmatic dispositions for national retailers, individual owners, and REITs.
Our deep experience in tenant representation has made us successful in this arena. The knowledge developed over decades of work with tenants translates well to disposition, as we know which tenants are the right fit for each vacant retail property. This has led to an excellent track record and specific strategies we use to market this kind of product, including vacant drug stores, QSRs, and discount stores.
Marketing a vacant retail site requires in depth submarket analysis. Our boots-on-the-ground perspective is critical here – only a local broker knows which retailers are already in the submarket and which are not, as well as what the community needs. We understand and validate market demographics to align tenant criteria with the specific submarket.
Moreover, we analyze the building itself to consider who can actually use it. In some cases, it is as simple as envisioning that a drug store can be converted into an ethnic grocery store, an auto parts store, or even a daycare (perfect size, great parking). In other cases, it’s as complex as the user gutting and opening walls in a freestanding building to convert it to the drive through for a car wash. Understanding the ability for distinct users to approach a site creatively is key.
Municipal guidelines must be taken into consideration. In all likelihood, zoning and development requirements have changed since the building was originally constructed. Factors that used to be grandfathered in may now impact how the land can be used. These can include setbacks, zoning, detention, access, and construction standards. A user with intention to renovate more than 50% of the building will have entirely different codes to adhere to. A ground lease user has more flexibility since the site doesn’t need to get platted, but a clear understanding of that specific municipality’s guidelines is critical.
This is also an area where our experience representing tenants in submarkets and cities throughout the region makes us knowledgeable of the nuances of each specific set of codes and requirements at the municipal level.
We also need to consider that specific retailers have size and land use requirements. Because the building itself has very limited second generation use options outside of local users, we view a closed Burger King as really selling land. We understand what we are selling, and how it can be utilized for prospective tenants within that particular marketplace.
The benefit of being in a tight market like Nashville, which typically has a vacancy rate around 2%, is that second generation space that can be repositioned for another use is in huge demand. Overall retail is tight, which has forced users to become more creative with second generation space or land they can procure. This benefits the seller immensely, as competing uses bid up the price and enable us to get the best exit for our client.
When portfolio owners, whether large landlords, national retailers, or REITs, are able to successfully exit their properties at scale, and we are able to backfill those spaces with the right users for the community, it’s good for everyone – the seller, the user, and the community. If you ever want to talk about retail disposition, feel free to give us a call.
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