A cheat sheet for first time buyers and tenants of historic commercial real estate buildings.
Let’s face it—owning or leasing commercial space in a strip mall is very different than leasing in a vibrant downtown area with impressive historic DNA. Whether it’s downtown Frederick, New Orleans or Savannah, the charm of owning a commercial building or operating a business in quaint downtown districts is difficult to resist.
But don’t let that charm blind you. There are many important items to consider before closing that deal. Here’s what you need to know about acquiring commercial real estate in a historic district.
Who are the People in Your Neighborhood?
What business types surround your potential building or store? Are you a high-end home décor boutique surrounded by hip but grungy record shops? Are there vacant spaces or buildings nearby? Do they look kept up or neglected? Are there people loitering in the middle of the day? Look at the area with a critical eye, and lean on your broker’s local knowledge—he or she might be able to point out challenges that are not easily seen.
Get to know the other shop owners or tenants or fellow building owners in the immediate area. Finding the right building to buy or space to lease is not just about charm and bricks and mortar. It’s also about people—your customer base, folks who live downtown and fellow property and business owners—who will ultimately help or thwart your ability to grow your business or sell your property for the right return.
Maybe you are not from the area where you want to buy a property or lease a store or office space. You arrive on a Friday evening to find the street hopping with locals and tourists. “Wow,” you think, “this is just perfect.” You tour properties with your broker and head out of town.
But on weekday afternoons, tumbleweeds roll through the heart of downtown.
Before you buy or lease, ask your broker how the city promotes its downtown area. Does the city have a robust promotional infrastructure? What does the website look like? What special programs or events happen throughout the year?
Connect with other owners or small businesses to get a sense of how things work in town. Smaller urban areas can be quirky good and quirky bad, and the strength of promotional and marketing organizations is a key source of lead generation for selling a building or having a thriving small business.
Downtown Frederick, Maryland is a great example of a small urban downtown that gets it. The First Saturday program, Alive @ 5, movies on the creek, art and craft beer festivals…Frederick has a robust year-round calendar of promotional events that draw locals and tourists alike to shops, restaurants, and entertainment offered in the historic district.
Terrific organizations like the Downtown Frederick Partnership are what you want to look for when vetting a downtown area’s marketing chops.
Know Your Code
You’ve found that perfect building or office space in the heart of a bustling historic downtown. You love the quirky architecture and brick facade. The interior space needs some work, but its charm factor is through the roof. With a few tweaks to the exterior and a knocked down wall, it is the perfect building to buy or office space to lease.
Wait!!! Don’t buy that building or sign that lease. Before you do, know your code.
You should do your own research, but it is always best to have a local broker by your side who has “been there and done that.”
Historic districts stay historic for a reason. They are preserved, protected and managed by the local historic society. Buying or leasing in a historic district has wonderful benefits, but it also has its share of hurdles.
Everything from the size of the sign you are allowed to put up to the color of the doors to keeping historically significant architecture visible could fall within the purview of the historic society. And that’s not mentioning the complexities and idiosyncrasies of adhering to building codes, when renovating older buildings.
Want to get rid of that drop ceiling and expose the beams of an old row house to lend charm to your clothing boutique? Be prepared to add up to $100,000 in renovation costs, if your building isn’t up to fire code.
Check out Frederick’s historic preservation guidelines to get a sense of what we’re talking about.
Every historic district is different. Every overseeing historic society is as well. You need to harness the expertise of people who know the community to help you avoid pitfalls (both time and money lost), during the process of making the building or space your own.
Cliff’s notes version of this blog:
- Get help early on from a commercial real estate expert
- Think beyond your emotions and rationally analyze a potential location
- Get to know the people who operate in the historic district—property value is about people as much as it is about charm
- Dig deeper to find a historic downtown that knows how to promote itself locally and regionally
- Know your historic preservation and city codes
Want to know more about downtown Frederick commercial properties? Contact us and we can chat.