We get contacted all the time by retail brokers who know we specialize in representing nonprofit organizations. They usually do so because they have been stuck with difficult-to-lease retail space and wonder if one of our clients might be a potential tenant or, in some cases, a purchaser. We have found that the most common nontraditional retail occupants are churches or other faith-based organizations, schools, or a governmental/municipal entity. We have also seen retail spaces occupied by nonprofit groups that provide donated food, counseling, training programs or medical services.
Many landlords and their brokers are concerned that these nontraditional tenants may not generate retail customers for the other tenants in the shopping center. This is certainly a legitimate concern with faith-based tenant. Churches or other faith-based tenants tend to be the ones that generate the fewest potential customers, as their daytime use is limited to administrative staff with occasional evening meetings and services on Sundays or Saturdays. The good news for centers with limited parking is that such faith-based tenants should free up daytime parking for their retail tenants. In addition, many faith-based groups are willing to take the less desirable space in a retail center. For example, we have represented a church and synagogue that both took the deeper “elbow” space and happily converted it for their specialized uses.
We have found that many of our nonprofit tenants do, however, generate customers for the other tenants. For example, our school clients have parents who shop before and after school; teachers and administrators shop, too, and seek restaurants for lunch and dinner. In addition, the schools have opportunities for catering and purchasing of supplies during the school day. Overall, the schools tend to be very loyal to nearby merchants.
Interestingly, even a food pantry will generate customers for the nearby grocery store. The food pantry frequently needs items to supplement its donations, and the clients need items that are not part of the food pantry donation. If the clients are on food stamps, they will need to supplement the food pantry supplies. As you can see, it is important not to make any assumptions!
Many of the agencies that provide counseling services or training programs are open until at least 9 p.m. during the week. These evening hours provide activity in the center and create additional opportunities for some retailers to capture customers.
For the nonprofit agency, making the decision to lease space is time-consuming and expensive, requiring much thought and planning. Therefore, we have found that our nonprofit clients tend to be very stable tenants who usually renew their leases. Another big plus for the landlord.
Overall, it is important that retail landlords and their brokers not make any assumptions about nonprofit agencies. They may discover that a nonprofit agency is their best tenant!
Eliza Solender is president of Solender/Hall Inc., a commercial real estate and consulting firm. Contact her at firstname.lastname@example.org.
This article was originally posted in DMagazine Commercial Real Estate