Stores and other commercial businesses on the ground floor of a condo building used to be a rarity but now they are becoming a hot new amenity, even a standard for newer buildings. Restaurants, food markets, drugstores, clothing stores, gyms and offices are occupying more space in residential buildings than ever before.
Why are businesses seeking out space in condos? A recent Business Week article proclaimed that for the first time in 20 years, cities are growing faster than the suburbs with neighborhoods tripling in size in the last decade—the Loop's population has ballooned to 20,000 in the past 10 years. With more residents in smaller spaces, retailers are looking to attract and expand their businesses.
“I would say that buildings that were constructed from 2002 to 2010, many of them do have commercial tenants,” says Nancy Ayers, senior managing director at Mesirow Financial in Chicago. “It's going to add revenue to the building. It's also a convenience for the unit owners because many of the retail tenants are geared for servicing the building and realtors may even consider it a selling point.”
Commercial occupancy in condo buildings is also occurring in the suburbs. “It's gaining popularity all over, besides Chicago proper itself. The suburbs, especially some of the nicer suburban areas, are building condominium structures in their downtown markets and almost all of them have restaurants on the first floors or retail,” says John Saisi, president of the John L. Saisi Insurance Agency in Arlington Heights. “One building that I know has two restaurants, a spa, a cleaner on one side of the building. The first floor is probably half commercial tenants, half parking spaces,” he says.
The relationship between the condo and the ground-floor business tenant is a complicated one. Having these stores on the ground floor is often seen as a plus by unit owners. But for management, it can raise questions. This article will review this relationship from the standpoint of insurance, an important item for any residential building.