oxford-street-1.jpgI am fascinated with cities and I have always been since I was a child. When I started going downtown as a kid, my parents always said be careful and make sure you keep an eye out for unusual things because the city can get you. Well, when I entered the world of real estate and started doing deals/work in the city, my parent’s advice became very applicable.

Doing deals in the cities and urban areas is a bit different from doing deals in suburban strip centers. Let’s just address some of the differentiating factors:

  • Sharing the Building: Many times in the city, you as a retail user are sharing the building with an office, apartments or additional retail users above you. Here is an example, the Ralph Lauren Polo store in Washington D.C.’s Georgetown neighborhood is a retail store that only occupies the ground floor of the building. High End Apartments are above the store and are rented out. The store is sharing the building with residents.
  • Preserving History: This can be tricky. In many jurisdictions there is a historical society in place with control over how the buildings need to look and what one can and cannot do. In most cases the way you design your sign and exterior presentation will need to conform with the historic society or else…things can get ugly.
  • Maintenance: In a suburban shopping center there are parking lots, parking lot lights, shared signs, landscaping, the shopping center facade, etc. More often than not these are not part of the urban retail experience. As a result, the operating expenses also known as TRIPLE NET Charges are treated differently.
  • Rent: This can very tremendously depending on where you are located, but across the globe, the dollar per a square foot or meter that someone is paying tends to be significantly more in historic retail corridors. Rents in places like High Street Kensington (London), Fifth Avenue (Manhattan) and M Street (Washington D.C.) tend to be much higher than the rent in suburbia. Rent is a complex issue and will covered in more depth in future entries.

If this is your first time opening a retail store and it happens to be in the city, you are probably better off in terms of adjustment than the person who has 5 stores in suburbia and is about to venture into the big city. The person doing their first deal in the city is going to have to modify their thinking. Many times landlords of historic urban properties are either out of town landlords, families or residential investors who bought a building because of the apartments and the retail was just a bonus. Many of these landlords are not in the business of fixing up their properties, so be prepared for an “As-Is” deal. Also be prepared to have very specialized construction/renovation requirements if there are residential or office tenants above you. There is something call quiet enjoyment and it can be tricky if you a music store with 3 levels of apartments above you.

The stuff above might make it seem that leasing space in the city is bad, but it really is exciting if you know the ins and outs before. Do some research on your target city and see if there are some special requirements (Always!) for retail stores. Now drive around town look for potential sites for your store and make that deal. Cities are coming back and now is the time to open a store in your city.