When Barret Design decided that they were going to expand their business to include long-term commercial property ownership, they needed to have a plan.
Initially advising them on the food & beverage potential for a new property they were developing, I was able to grow my responsibilities to include the creation of a scalable short-term revenue generating commercial strategy.
Commercial properties have the potential to generate impressive Return on Investment, but they also carry with them great risk. For Barrett Design’s first commercial project, these risks were compounded by an 18-month period where the developer would own the property before work on a residential addition would begin.
Once construction started, the commercial space would have to be vacated until work was completed. That presented an interesting challenge: it was too long to leave the space vacant, but too short to attract a serious high-paying tenant.
Not only would leaving the space vacant until all work was finished mean lost revenue, it would also result in years during which the site would be an unattractive blight on the neighborhood, making it that much harder to sell as a viable commercial space once the construction had finished.
As a small shop entering a new field, Barrett wanted a strategy that was cost effective and scalable. If their strategy worked, they wanted to be able to make the most of it, but if it didn’t they needed to be able to walk away quickly and limit any potential losses.
Further, the ideal solution would serve multiple goals: in addition to generating immediate cash flow and keeping the space active and attractive, and it would be a repeatable strategy that could be employed for future development projects.
Rather than fight the realities of the compressed 18-month rental timeline, Barrett would embrace it and make it an asset.
Instead of accepting the first tenant willing to sign a lease above breakeven, Barrett would operate and actively promote the space as a venue for pop-up retail.
By only selling the space to tenants looking for short term space, they would eliminate the need to make concession to tenants that would prefer a long-term lease.
To make this proposal reality, a few things had to happen:
Create a new organizational chart to assign operational responsibilities and direct existing resources.
Identify gaps in capabilities that would need to be addressed.
Financial projections to determine breakeven points and KPIs to allow performance to be actively monitored.
A strategy outlined to sell the property to potential partners and the temporary retail plan to potential investors.
Commercial property management was a new line of business for Barrett, so identifying their current capabilities and connecting them with partners who could fill the gaps in their skill set was the first priority.
An analysis of their existing capabilities showed that, as developers, they were capable of designing, building, and even maintaining a commercial space, but understanding the marketplace, identifying, building relationships, and selling to potential tenants, and managing the ongoing operations would require outside partners.
Fortunately, companies and professionals were streaming into the market to provide exactly these services.
Based on the capabilities analysis we narrowed the list of potential partners to the few that would best match their needs.
With an org chart outlined and partners selected, the numbers needed to be checked.
Extensive research into the market and meetings with potential partners established rent and occupancy estimates, into that were added variable and unplanned costs that I knew from experience operating a brick and mortar business might come up.
Finally, honest appraisals of Barrett’s appetite for risk and the resources they were able to commit to this project helped to establish thresholds and milestones that needed to be reached for this project to be worth continuing.
The temporary retail plan would also have to be sold to potential investors in the development, many of whom didn’t quite understand what ‘pop-ups’ were all about.
To help Barrett sell the idea, supporting documents were created, talking points written, financial projections created, and market trend analysis performed.
By reaching out to these partners, pitching the space and the neighborhood, and defining the long-term goals of the development before the developer had finalized the purchase of the building we were able to begin the sales process and minimize the time that the space would sit vacant.
And, with ample evidence to support the viability of the plan and a clear value proposition spelled out, Barrett Design was able proactively address investor concerns and close out their fundraising.