Small Retail Great Location purchase opp

[Steve Olafson]

I am still fairly new to the retail business.  I have built and sold a 10,000 sq. ft. building in the past.  I currently have 8700 sq ft divided into 4 stores.  I bought this as a value add that was half empty and only have one small space left to lease.

I am looking at a small 4400 sq ft building that is in the heart of downtown Scottsdale.  The building is old but it has been upgraded into a nice contemporary design with rusted metal trim and shade structures.  The roof is new and the interior finishes are nice.

It has been divided into five small spaces with hair salons in each of them.  The smallest individual space is going to be vacant soon.

The rents are at $18/sq ft and are low for the area. 

The play on this is simply the fact that it is in downtown Scottsdale.  I believe this will drive the value as rents are likely to strengthen faster here that in most locations.

Any inputs on this deal? 

[Lee G.]

Couple thoughts - 

how is the access? Can people easily get in and out from both sides of the street? 

Which side of the street is it on in relation to daily traffic flows? Is it a side that most people go home on or into work on? 

How big are the traffic flows? Is it a major street? What is visibility like when you are driving by? 

How far away are other major shopping that will bring people near your center? Major shopping would include centers anchored by grocery stores all the way up to a major box center. 

What sort of other retail is around it? What is missing from that retail? This will help you determine your potential tenant list. 

Looking at that surrounding retail, where the rents at the similarly sized and positioned centers near you? How do you compare to these? You shouldn't look at the inline rents as they will most likely be higher. 

How fluid are your units? Can you demise a couple down to smaller spaces or combine a couple to make larger units? 

How about parking? How many spots? 

And then as you mention, the typical structural and mechanical stuff. Roof? Power options (can get get more power in for a tenant like a tanning salon)? HVAC and electrical condition? 

That's my general thought process when looking at retail. We own a similar center and love it.