Some Thoughts on Including Retail Components in Rental Buildings

Whenever I drive into the city to visit the public library I pass on my route a small purpose-built rental apartment building which has always intrigued me. First of all it’s very small, with four or maybe six units total. Second, it was built as an infill project in an area of the city which has been C class for a long time. Third, it appears to have been fully occupied since day one. Fourth, despite being built in 2012 it still looks new.

Overall, this apartment building is a good example of a small-scale project which a new developer could easily fund and construct. But that’s not what I want to talk about here.

The ground floor of this building has two retail units facing the main street. They’re very small in square footage, perhaps 300 SF each (that’s an estimate, since I don’t really know). Right now there doesn’t appear to be a wall separating the two units, so as far as I can tell from the street it’s one space with two exterior doors. The screenshot below from Google maps shows the building with the two retail units facing the main street (the small For Lease sign in the window is advertising for “professional and retail” tenants).

There’s nothing remarkable about a multi-unit residential building located on a main street having a retail component, since it’s a requirement in many municipalities. What’s interesting is that both retail units are empty and have always been empty. Remember, this building was constructed in 2012—that’s seven years of 100% vacancies in the retail component. Given the location, I’m not surprised these units have never been rented since it’s not a busy retail area, and obviously I can’t rule out factors such as the landlord asking unrealistic rents or holding back the units for another use, but it seems pointless to me for this small building to have a retail component, which has never been used and probably never will be.