Retail or Offices - in my building?

[Pavel U.]

I need help deciding what to do with my commercial building. I have a 3,000 sqft (plus full basement) commercial building in what I consider to be "B" area. I'm split between "converting" into 2 retail spaces, or an office building.

Option 1: Divide the building into 2 retail storefronts, one approximately 1,500 sqft, and other 1,200 sqft. Gross rent in that area is about $25/sqft. Tenants will pay all CAM, and I can even try to bill them a portion of the property taxes. To divide the building, I'll need to split electrical, get new HVAC, build second ADA bathroom, new entrance, etc. I estimate it to be approx $65-75k.

Option 2: Gut the main level and cram in there as many offices as I can, approx 16. The conversion will be a lot easier since I wouldn't need to add a new bathroom, split electrical, HVAC etc, I estimate it to cost approx 100-120k to look nice and attractive. With this though, I'll be responsible for all CAM, property taxes, heating, cooling, cleaning, snow removal, Internet, water/garbage. But even then it'll still cashflow around $1,000-$1,500/mo more than the first option. 

Pros/Cons: While the higher cashflow in option 2 is more attractive, and also easier to convert, I feel like it'll be a lot more "work" managing those 16 offices, as each lease will be 1 year long. On the bright side, if a few offices vacate, I still have enough offices to cover all my expenses. With option 1, any vacancy will take months to fill, but it's completely hands off (NNN) except for roof/structure/parking, and my tenants will build out their spaces ($$$), and each lease will be between 3 to 5 years long.

What do you guys think, and why?