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If you’re thinking of buying an apartment in a building with commercial space, or if you’re on the board of one choosing a commercial tenant, you’ll need to evaluate them in terms of nuisance factor, revenue potential if the building is a co-op, and curb appeal.

If managed properly, your building’s maintenance charges are offset by the income received. While the argument can be made that any income is good income, the type of commercial tenant does matter–particularly to buyers considering an apartment right above a commercial space. Always review the co-op’s policies on choosing who they will and will not rent out retail space to. There’s certainly an upside to retail space, but what’s right for others isn’t always what’s right for you!

Here’s a list of some typical commercial tenants that occupy space in residential buildings and the pros and cons of each.

1. Banks

Banks are a big retail favorite. Short hours, low traffic and ability to pay the rent make these tenants highly desirable!  Another big advantage…they typically don’t need to do any extensive alterations when they move in.

2. Restaurants and Bars

All restaurants are NOT created equal. A nice restaurant can add panache, and depending on the restaurant, you may appreciate the ease of take-out. However, a fast food restaurant may just devalue your building. Having a restaurant at the base of your building may sound like a grand idea, but consider the cost. Noise, hours and possibility of rodents along with other pests might make life difficult for you. Those however, are just the obvious objections.

Restaurants require air duct and ventilation that a bank or shop wouldn’t need, which can be costly to the co-op. Noise and smells can be a problem and when the restaurant stays open late, you might be kept up late. The co-op can limit these operational hours in the lease agreement.  Just make sure to read the lease and other building documents before you buy that unit!

3. Retailer

Just like restaurants, which retailer is key. A high end retailer will attract a different kind of attention to your building than a discount store.  Mom and Pop stores may go out of business and leave the co-op strapped for cash.  Also, find out beforehand if deliveries are going to block access to the residential lobby.

4. Grocery Stores

Sure, it’s great to have a place right in your building where you can pick up milk and eggs on your way home, but may come with some of the same problems that a restaurant would–long hours, noise and possible unwanted pests.

6. Dog grooming/doggie day care:

Being able to drop your dog off in the building on the way to work has a similar appeal to the convenience of dropping your kid off in day care in your own building.  Although, if your building has a no pet policy, this may not be a real option.  Additionally, disposal of dog waste can be a major issue.  Make sure the co-op addresses this specifically and strictly in the lease.

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