How to approach major retailers and market land for redevelopment

Question

I own a Acre of commercial land with a 8,000 sqft building, asphat parking lot, and grass fields on a corner lot of a main intersection. There is a major retail gas station, dollar store on the other corners along with a church. I think this land would be ideal for a major chain pharmacy and my commercial real estate agent agrees. I want to present this opportunity to those type of companies direct but im not confident in my agent or other commercial agents in my small town ability and experience to intelligently and aggresively market this space to these type of retailers for a redevlopment opportunity to purchase my property...

Any suggestions are greatly appreciated!

Quentin West · Answer

@Paul Parker, in addition to the things that Chris mentioned as being important to potential purchasers, I might also look into Fed/State/Local incentive programs that might make your area more attractive. Most states have economic development incentive programs that effectively reduce the cost of development/operation through subsidies, tax credits, etc. When I work with clients on development projects and land deals I try to do as much of the legwork regarding demographics, rental rates, incentive programs, possible financing, etc as I can so that potential purchasers have all of the information that they need.

For your data research I would check out the data site ESRI. They have a free trial option that will allow you to run ring radius or drive time reports on a specific location. The trial is for 21 days or 200 credits (roughly 20 reports). You can access just about anything you need in terms of demographic data, trip counts, daytime employment, etc. One of my favorite reports is the Retail Marketplace Profile which gives you a retail gap analysis on your selected area. It shows estimated supply and demand (in $) by retail/food industry classification. You can use this to target retailers of underrepresented industries. Good luck!

Joel Owens · Answer

Pharmacies are generally not located next to dollar stores. Dollar stores tend to like average to poorer areas. They also like more weak suburban to rural locations.

Pharmacies tend to like the opposite of that for their target markets. Urban core to strong suburban, very high traffic counts,etc.

Some tenants you go through tenant rep brokers and other tenants you can deal directly. I have talked with pharmacies before. You have to see if they are even expanding in your state currently. Pharmacies tend to be 10,000 to 13,000 sq ft so 8,000 ft is generally too small for them.

Your acre of land it makes a big difference with the tenant. Pharmacy, gas station, then banks usually pay the most money for the corner. Other tenants like to be next to the corner.

Pharmacy for example could pay 200k or 300k a year rent whereas for the same  acre a Bojangles could have a small building but a large parking lot and only pay 70k a year in rent to start.

Pharmacy i could pay 1 million for the land with the right corner and make money but if only QSR wanted to go there now I need to get the land for 300k or so to make money. This is why many developer WILL NOT pay a certain price for the land without a signed lease and approved zoning with site plans in place prior to closing. If they cannot get the tenant and rents they want they can lose money on a property purchase.

Not just the rent to start but the tenant name makes a difference also. Mcdonald's and Chick Fil -a can be 4 caps and Starbucks 5 caps. Bojangles 6 plus cap rates.

Chris Seveney · Answer

Your broker should be working with you on doing the marketing - you can create the marketing material but they will be the ones marketing it. Yes this should be discussed during interview process

Paul Parker · Answer

@Chris Seveney @Quentin West @Joel Owens Thank you guys for the great input!

To give you greater details of my property so you can better advice me with a startergy it is located is a C class neighborhood (So you are dead on regarding your Dollar store comment Joel), the building is a older building thats been neglected for years so it needs a lot of work, its a mix use building with six 1bed 1bath apartments upper and 4 retail spaces lower of which only 1 is currently occupied.

So with that my short term goal is to do more repairs and get the other 3 spaces leased and I might also convert the apartments into office spaces to be leased. My long term goal or exit stratergy will be to sell the space along with the land to a developer to possibly demo the building and redevelop the space for such retailers that will be ideal for a corner lot in a high traffic count C class area.

Paul Parker · Answer

Thanks for the suggestion!

So do you suggest that when I seek out a experienced broker that during the interview let them know my marketing plans and make sure that they are willing to do the research to find out the things you've mentioned ( job growth, demographics, vacancy factors, zoning, and traffic trips), or be prepared and willing to do that research myself or better yet both?

@Chris Seveney

How to approach major retailers and market land for redevelopment

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