If it's a newer or retail house, it's usually not a big deal but older homes or houses that need rehab can cause issues. 

Let’s also or forget startup costs such as signs, business cards, etc...If you plan on making some retail sales, then maybe it will be worth it..

The upside to this scheme is that retail buyers will be abundant.

There is also a newly remodeled retail location nearby that has a couple vacancies (not sure how long these have been on the market).The lender we wanted to work with backed out because of this issue.

Half are mixed buildings with apartment  on top of  the retail space.

The other option, if you are going to buy retail, is to have a PML carry the note for you (not the bank) and you can negotiate the terms (downpayment, rate, amortization, etc). 

Lawsuit was a BS suit for something like $1 or $2m from the commercial "HOA" of the retail space owner of the building disputing like $7k in annual electric costs of common space (lighting of the parking garage IIRC) but this lender + other lenders said the lawsuit made the condo association unwarrantable.

The last thing I would advise you to do is to buy something (especially a multi fam) and pay retail price.

I represent buyers only and specialize in retail investments and land for retail development and have contacts with local lenders. 

I assume you want a piece for yourself, that would leave the buyer essentially paying retail which they're unlikely to do from a wholesaler.