Churches in “Big Box” Retail

If you are driving around town and you see churches in “Big Box” retail centers that is a clear sign that you are now driving in a soft retail market.  Fortunately for owners of large retail centers, there are several tenants that seek out these markets just waiting for the right opportunity to take advantage of lower rents, more flexible lease terms, ect.  If we continue to have strong population growth in Houston and the banks continue to lend conservatively with Faith based institutions, then we can expect to see demand for 2nd generation “Big Box” retail to increase. Here are some of the challenges that churches face in retail centers:

- Tenant Improvement Dollars

Unless the space is 1st Generation (slab space), changes need to be made to accommodate a church and it’s congregation.  Increased # of bathrooms, open areas, higher ceilings, acoustics, lighting, are just a few of the things needed for a church to call a retail space home.  Depending on the landlord, the church may pay none, some, or all of the cost for build out.  This can run from range from a few thousand dollars to the millions depending on the size of the space.

- Lease Term

Short term leases have a much smaller impact on commercial property values.  Because of this, landlords and banks frown upon short term leases.  Expect to sign at lease a 3-5 year deal or longer for a decent strip center.

- Expansion

Many times a church may have to lease a large contiguous block of space immediately to ensure that they will have enough space to accommodate a growing congregation.  Otherwise other tenants may end up leasing open spaces and boxing the church in, limiting future growth.  The landlord can relocate tenants, but this cost additional time, money and resources for the landlord.  That extra cost will be considered when looking at any future church expansions potentially driving rents higher.

There are a few other issues that need to be addressed as well during negotiations like personal guaranty, certificate of occupancy,ect.

If you want to know more about this topic, whether you are a Pastor or Landlord just give me a call and we can talk shop or send me an email anytime.

Working on Expansion

Working on a proposal for a third expansion for my Primerica client.  This is a great time in the market to take advantage of what we call “Blend and Extend”.  It is more advantageous in this market to take advantage of a soft market now rather than wait a few years for the landlord to have the ball back in his court.  Give me a call and we can talk about how “Blend and Extends” work and whether or not it is the right play for your business.

P.S. On my Primerica client, if you met this guy you would understand why he is growing when so many tenants are playing it conservative.  Great business mind, great client!