Commercial Conversions

Hello all,
Just wondering if anyone has gone through the process of converting a retail shop front premise in a small strip shopping area into a residential dwelling. I've recently come across a very depressed regional shopping strip where over half the shops are vacant and either up for sale or for lease. Reason being (of course) the expansion of a fairly major shopping complex just down the road. Underlying economics and residential demand in the area seem pretty strong.
Any feedback much appreciated.
 
Hello Rolf,
Thanks for the feedback. From my initial enquiries, I believe the zoning issue is rather minor. The more major one is town planning.
Yes, I guess finance could prove a little trickier than that for straight out residential, but these particular properties are in the low end, and could be bought off the credit card (so to speak). The asking price on this particular shop is only $24,500. It's an ex butchers shop and has been on the market for two years!! The vendor seems pretty desperate and is offering vendor finance on $7K down, so I'd imagine a cash offer $15K - $20K could entice him/her!!
A quick look at the interior today gave me a better perspective on the work involved. It's been a purpose built premise with cool room, meat conveyor rail, boning room, etc. Think I'll pass on the deal!! Conversion costs could easily blow out..
 
Eric

It's a bit hard to offer suggestions without even knowing which State you are in.

A general idea of locality would be helpful.

SOHO (Small Office Home Office) are gaining popularity around Melbourne, and the Street!Life (VicGov) program has some good handouts to offer suggestions for the revitalization of strip shopping centres.

I'm going through the planning process of 'Change of Use' at the moment. Change of Use DOES NOT mean re-zoning, and if the purpose of the permit is not used, then the property reverts to original use.

In your example, this would be retail.

So unless the area you are speaking of is a tiny rural town (and it doesn't sound like it if a major shopping centre is currently being built) the potential for eg commercial rather than retail would probably be an excellent alterntive use. Or even as a medical centre!!!


Cheers

Kristine
 
Hello Kristine,
Yes I'm sorry to have been so vague on locality. This property is in Morwell in the Latrobe Valley area (Victoria). And the shopping centre mentioned just opened a Big W and has a Bunnings Warehouse along with a cinema complex with numerous other franchised and independent traders operating in the centre.
Thanks for the advice on the Street Life government initiative. I was unaware of its' existence!! Do you know if it covers regional areas??
"Change of Use" to something of a commercial nature could be a better alternative. Medical?? Quite possibly. If the conversion figures stack up, why not??
It seems a little more due diligence could possibly make the deal look sweeter.
Thanks again for your helpful input Kristine. Good luck with your own "change of use" project. Would you care to share the details??
 
Hi Eric

Thanks for that extra information.

Morwell is undergoing transformation, and while it is still not 'commuting' distance to eg Dandenong, the freeway and the fact that developments are now reaching eastwards past Pakenham make it not quite as far away as it way.

Believe me, wreckers are relatively cheap to pull out unwanted equipment and previous 'improvements'.

Opportunity, like beauty, is in the eye of the beholder.

Can you see the opportunity?

At less than $30,000 you could have a lock up shop within spittin' distance of a major regional shopping centre.

Even if it just sat there for a year, that would be approx 8% x $30,000 interest plus council rates & insurance eg another $1,000 - $1,200 - not really expensive while you then do your market research.

Think laterally. What is missing in the area which you could go through the planning process to provide.

Medical Centre? Dental or Denture Clinic? Accountant, Family Planning etc etc With your own front door, you offer street appeal and the choice of operating hours not available to tenants of the centre. What about a film processing (reatil) shop?

In other words, the zoning is Retail which is for the purpose as described. Changing to 'commercial' is not a big deal and may be worth a try.

I guess off street parking is somewhere around. Does the shop have rear entry, laneway or service yard? Is it sewered? Does it have waste (blood) disposal facilities?

Is there an upstairs?

Remember, with commercial you buy the footprint and the concrete shell. Anything else is usually junk so don't bother trying to value obsolete equipment.

How many square metres? Commercial rentals are based on nett lettable area. Does it have inside WC & ensuite, or could one or two be plumbed in? How far away is the nearest bank? Does the area need another credit union or financial services centre? Where is the nearest newsagency, and what hours do they operate?

My own commercial property was a lemon for a long time, now it has a thriving tenant who has brought the right service into the area. When I bought it, it was used as a bank, and was zoned Public Use 1, even though it was in the main street. I had to apply for a permit to operate a retail store. There was a small fee for this and it took about three weeks.

Take a day off and go lean on the counter at the local Shire Offices. Ask them as many questions as you can.

Go to www.doi.vic.gov.au for the planning scheme on line for the municipality. (Department of Infrastructure) This will show you every single tenement (property) for the municipality.

Check out the zonings before you go to the Shire - the more info you have, the better quality questions you will ask.

Applying for a permit for change of use needs to be accompanied by a written submission and fairly substantial documentation. This may include showing internal partitioning and even placement of furniture, fire systems etc the application will cost somewhere between $50 - $1,000, plus drafting and / or survey fees, somewhere between $1,000 - $5,000, depending on how complex things are. (My Medical Centre change of use application has cost about this so far) However, the local Shire may be just as happy with a photocopy of the information which they already have on file, 'whiting out' the bits you are removing and sketching in whatever you may be adding, then resubmitting a couple of copies of the modified plan. (That's what I did with the shop!)

But firstly, you have been attracted to this property. Unless you secure it by putting money down, you could do all this research and find it has been sold. There will always be a useful purpose particularly for a retail premises, and obviously the big investors have put up substantial funds for the new shopping centre close by.

Eric, property is my passion. I don't think there is anything not worth something, just about anywhere on this planet. People think I'm 'lucky', but the properties which I have bought over the years have all got some 'point of difference'. One house on a busy road sat on the market for months before I bought it, and now it has improved remarkably simply because it is in such a good position.

The little shop sounds like a great opportunity to give the area something special - why not go for it!

cheers

Kristine
 
Dear Kristine,

Good post!

Sometimes we all forget where the money making opportunities are because we are not looking outside the square.

Properties that everyone else turns their noses up are an opportunity as the decreased demand means you can negotiate on the price until they really are viable.

One mans Picasso. Another mans Leonardo.

Couple of possible ideas for a high traffic area. Ink Jet Recycler (E.g. in the Cartridgeworld line http://www.cartridgeworld.com.au/ I notice they have stores in Ballarat and Mildura but not one yet in Morwell.) or a battery recycler. More mobile phones and rechargeable batteries are being used everyday but have a limited life span. http://www.battrepack.com.au/index.htm

As Kristine says. Do the market research on what is needed in the area and then target potential tenants and sell the "opportunity" to help them open their new store in Morwell designed with them in mind.

Cheers,

Sunstone.

PS. Eric with the store make sure that you investigate the parking available. This can often be an oversight. Without parking you need a high level of foot traffic to command premium rents.
 
Hello Kristine,
Thanks for your detailed response. You have certainly opened up other (un thought of) potential uses for this particular premise.

>>Medical Centre? Dental or Denture Clinic? Accountant, Family Planning etc etc With your own front door, you offer street appeal and the choice of operating hours not available to tenants of the centre. What about a film processing (reatil) shop?<<

All the above are very possible candidates, and are certainly worth following up on.

>>I guess off street parking is somewhere around. Does the shop have rear entry, laneway or service yard? Is it sewered? Does it have waste (blood) disposal facilities?<<

Plenty of parking facilities with laneway and rear entry. It is sewered, but don't know about the waste (blood) disposal.

>>Is there an upstairs?<<

No upstairs. Mezzanine is possible

>>How many square metres? Commercial rentals are based on nett lettable area. Does it have inside WC & ensuite, or could one or two be plumbed in? How far away is the nearest bank? Does the area need another credit union or financial services centre? Where is the nearest newsagency, and what hours do they operate?<<

Around 90 square metres. No indoor WC, but could be relocated indoors. Unsure about the nearest bank or credit union at this stage. Unfortunately the nearest newsagent was about two doors down, and it seems their competition drove them to the wall also.

Your words of inspiration are somewhat contagious. It really is a mindset game isn't it?? Thanks again for your positive input.

Thanks also Sunstone. Parking isn't a problem. Plenty of angled off street available. The area is predominantly residential, so kerb side parallel is also plentiful.
 
Hi Eric

Newsagency close by is a real bonus!

When assessing a shopping strip, there are five major assets:

1 Bank/s
2 Post Office
3 Public Transport
4 Newsagency
5 Can't Remember! Possibly free parking?

The newsagency brings people on a regular basis.

Is there a Hot Bread shop nearby?

If not, then before you pull out all your food grade tiling, scout around to see where the nearest bakery is.

Shopping malls are wonderful, but not suitable for businesses which operate outside of the 9 - 5.30 routine.

With 90msq, you have a reasonable size to work with. Glad to see that the creative juices are flowing! Hope you come up with a winner of an idea.

Cheers

Kristine
 
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