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  • Writer's pictureTomlin Commercial Real Estate

Silver Lining for Commercial Real Estate

Vacated commercial real estate property is creating opportunities for some vendors.

As of Dec. 1, 2020, more than 110,000 restaurants and bars nationwide have closed temporarily or permanently due to the Covid pandemic, according to the National Restaurant Association. On the bright side, vacated commercial real estate property is giving vendors with cutting-edge technology and limited interaction with customers an unprecedented opportunity to scoop up prime space that previously wasn’t available or affordable.

“Commercial real estate is a big expense for companies and investors,” said Nico Hohman, Director at Tomlin Commercial Real Estate. “It is also a long-term investment. Companies and investors won't commit lots of money to big, long-term projects – whether that's leasing a new warehouse or buying an office building – if they are uncertain or weary of the economy's future.”

Hohman said that leaves landlords out of luck because they don't have any businesses to lease their space to, which causes rental rates to go down and overall property valuations to go down, too.

“Commercial real estate is also a lagging indicator of the economy, meaning that it takes longer in an economic recovery for the commercial real estate market to bounce back,” Hohman said.

We're not seeing this as much in the Tampa Bay area, as the market has not seen the rash of vacancies and business closures as other metro areas, according to Dave Burton, Advisor at Tomlin Commercial Real Estate.

“What is happening, though, is well-funded groups (both chains and larger independent groups) are reaching out to smaller independent restaurant owners and offering to pay fair market value of assets such as furniture, fixtures, and equipment if the struggling tenant and landlord are able to establish a reassignment of the lease to the buyer,” Burton said. “Basically, it's a way to minimize the negative impact of a personal guaranty of a commercial lease should the business have to close.”

With the growth of "off-premises" dining, restaurants are trying to minimize square footage to make rents more manageable. Also, outdoor space and the ability to negotiate curbside parking spaces, drive-throughs, pick-up lanes for third party delivery drivers, etc. are becoming more important. Simply put, restaurants owners are looking to go smaller in terms of interior square footage.

One such restaurant business looking to capitalize on this trend is Tomlin Commercial customer Canopy Road Café, a regional breakfast and lunch chain started by South Tampa native Brad Buckenheimer in Tallahassee, which is slated to open in mid-April at 4308 Gandy Blvd.

“They are growing throughout Florida, but this location is sort of a ‘the prodigal son comes home’ location, so it has extra meaning,” Burton said.

Certain markets have weathered the pandemic better than others, and Florida is definitely poised to bounce back faster. The use of Instagram and other forms of social media in particular have really allowed new concepts to generate huge levels of buzz pre-opening.

“From a commercial real estate sales cycle, we are at the bottom of the pandemic-induced recession but slowly starting to go back up the recovery curve,” Hohman said. “If businesses are relatively certain of their economic future, now is a fantastic time to invest and lease space because rental rates are relatively low and prices are relatively affordable. Plus, interest rates are at historic lows, so the cost of doing business is low.”


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