Profitable Neighbors Leasing Commercial Space in Your Building

It's not uncommon for co-op and condo buildings to lease that empty space on their ground floor to commercial tenants - usually restaurants, retail stores, or small professional offices. While commercial tenants' rent can add to a building's revenue, issues with noise, traffic, and the 80/20 rule can sometimes make the relationship complicated.

The Desirable Versus the Profitable

The list of potential tenants that make good neighbors is relatively short. That can become somewhat of a potential problem with condos, because, according to Alan Fried, a partner with Ganfer & Shore LLP, a New York-based law firm specializing in both commercial and residential real estate, "In condos, the board rarely has anything to say about the commercial tenants. Usually, the commercial owners can mostly do what they want without getting permission from the residential board."

A co-op, which can be more selective, should beware of certain tenants - particularly restaurants, according to Fried. "Restaurants usually don't make good neighbors," he claims. "You want to be very careful because of the obvious mice, vermin and odor issues." Dry cleaners, which deal with chemicals and odors, also top the co-ops' least-wanted list. Fried says banks, which keep regular hours, are often considered the most desirable kind of commercial tenant.

However, adds Faith Consolo, vice chairman of Garrick-Aug Worldwide, a commercial space and leasing expert based in Manhattan, the reputation of tenants in the foodservice industry is changing. "The reason is you have better food tenants," she explains. "Years ago supermarkets were not desirable, but now there are higher-end markets."

High-end retail stores also make desirable tenants. "Putting aside the financial implications in terms of their ability to stay in business and pay rent, stationary stores, and probably drug stores, also are ideal," Fried says.

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