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Mixed-use properties are increasingly common, especially in urban areas. They are a highly favored asset class for investors as their usage covers two or more asset classes. This means that cash flows can benefit from two (or more) distinct income streams, perhaps offering different rates of investment returns.
Mixed-use can refer to a wide variety of properties and some of the permutations may be:
- ground floor retail space with offices above;
- ground floor retail space with residential accommodation above;
- ground floor retail space with offices and residential accommodation above;
- hospitality space such as longer stay serviced apartments and regular stay hotel in one building;
- hospitality space such as longer stay serviced apartments and residential accommodation in one building;
- office building with either warehouse or light-factory building attached.
In fact, there are a lot more combinations which comprise mixed-use properties but, no matter whether you are a landlord or seller, or buyer of such properties, our professional commercial property advisors at Century 21 will be more than happy to help.
Some of the issues relating to mixed-use properties…
Investors will invariably look for mixed-use properties in good locations, close to the demand drivers for the occupants, whether it be a retailer or a logistics warehouse. Occupiers will, obviously, want to be close to transport links and local amenities, but a good location for a retailer may not be a good location for an office user.
Is the property purpose built or has it been adapted to such mixed-use? Does it meet the relevant building codes as different uses may have different codes in terms of fire escapes or issues such as sprinklers or smoke detectors and so on.
Given that there may be two or more uses in the same building, are these uses permitted by the local authorities or, indeed, the landlord? Are the uses compatible or likely to lead to operational issues (ie over demand for car-parking spaces)?
DURATION OF LEASES
Lease lengths can vary as often, for example, retail leases may be much longer than residential leases which are typically 1 or 2 years, but this can also depend on the state of the market, the demand, and supply factors in the immediate area and so on.
RENTAL AND INVESTMENT YIELDS
Different property types attract different rental levels and different investment yields or returns: do you know about the differences?
As with the above, the calculation of rental for different property types can differ: is it so much per m2 or on a lump-sum basis, or based on the business turnover. And what is included in such rent, the CAM, for example?
COMMON AREA MANAGEMENT ("CAM") FEES
Are these fees payable by all tenants on the same basis, or are the charges for any residential units less or more? What does the CAM include?
Is the rental deposit the same for each property type? How and when can the tenant have this returned?
Are plenty of spaces available for tenants of the various mixed-uses and is there a separate charge for such usage?
Century 21 commercial specialists have a full range of knowledge about all property asset classes and can provide a great service in accordance with your needs.
If you are an owner or landlord or a prospective tenant, buyer, or a seller of a mixed-use property, feel free to call or email us now for the appropriate advice!
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