The Difference Between Retail and Office Real Estate Pricing

Commercial real estate can be broken down into four main categories: industrial, retail, office and bare land. Industrial and bare land real estate are usually the easiest to recognize, but when it comes to retail and office properties, many people have a hard time making the distinction. I’ll show you a few key characteristics of retail and office real estate that make all the difference on how they are sold.

What makes a property a retail property?

A retail business relies on a steady flow of customers coming in and out throughout the day. The ability of potential customers to locate, get to and walk through the doors is essential to the success of retail businesses. Therefore, retail real estate can’t be placed just anywhere. Retail properties are placed in high-traffic locations, such as in a mall or on the main road. The way that the property incorporates exposure and accessibility is also essential: think of a ground-level shop with wide walking areas compared to a top floor unit with no elevator. Availability of parking and ease of navigation are also high priorities on the retail space list.

Another important feature of retail properties is their appearance. Along with all the features listed above, retail properties must build rapport with clientele through the building’s aesthetic. Quality furnishings, clean structure, good landscaping and even the appearance of the neighbourhood will make a difference for a retail property.

What makes a property an office property?

Comparably, office real estate is typically less exposed and places a smaller emphasis on aesthetic. Office spaces are planned for productivity and expect a lower rate of traffic through the door. For this reason, you’ll find office real estate in less accessible, quieter corners behind other businesses, tucked into residential areas, or on side streets. Office properties may be harder to get to and may only offer enough parking for a certain number of employees.

How retail and office real estate prices differ

The discrepancy in pricing between retail and office real estate really comes down to what the property was built for and how it was built. A good property in a low traffic area with limited accessibility and exposure will be priced far differently than an identical property in a high traffic area with great accessibility and exposure. Not aware of the features listed above, many people find it hard to believe that the distinction between retail space and office space can change as much as 10% of the price. As you search for retail or office real estate, it may sometimes be hard to tell which category a property falls into. Paying attention to the location, accessibility and appearance can give you some clues when the line gets blurry.