Commercial Condos in Nashville Help Make Business More Affordable

If you own a business in Nashville, you know how expensive it is to open and operate.

However, there is a solution for entrepreneurs looking to save on their expenses while also building up their investment portfolio.

Here’s why commercial condos will help make business more affordable for Nashville’s entrepreneurs.

The Nashville Market

Ask any Nashvillian what they think of our city’s current position and they’ll all say the same thing: no one saw this growth coming.

While the rising value of real estate has been beneficial to many property owners, local business owners and the entrepreneurial community have seen a massive increase in their rental expenses.

How much, exactly?

Cost of Commercial Space on the Rise

Since 2010 alone, office rental rates have risen from $18.44 per square foot to $28.92 per square foot - an increase of 57%. Sales prices in that same 10-year period have risen from $114.64 per square foot to $194.84 per square foot - an increase of nearly 70%.

In residential real estate, there is a very clear tipping point for many individuals. Once rents reach a certain point, it makes sense to just buy since you’re essentially floating a mortgage, anyway. However, it’s much more difficult for business owners to purchase their own space, considering the fact that most office or retail locations are often a part of much larger properties.

With larger properties comes higher pricing, leaving those opportunities to commercial real estate investors, alone.

But commercial condos, previously a rarity in Nashville’s commercial real estate market, can help combat this dilemma.

What is a Commercial Condo?

Like a residential condominium, or “condo” for short, a commercial condo is a privately owned individual unit within a building of other units. Condo owners jointly own shared common areas, such as conference rooms, gyms, garages, elevators, and interior / exterior hallways, to name a few. Compare this to a “standalone” building, where you would own and be responsible for maintaining the entire property.

Commercial condos are also governed by an HOA, “homeowners” association that makes and enforces rules for the property and their tenants. Purchasers of a commercial condominium automatically become members of the HOA and are required to pay dues (HOA fees). Some associations can be very restrictive about what members can do with their properties, which is intended to preserve the balance and value of the project.

While commercial condos are uncommon in Nashville, they can typically be found in low, mid, or high-rise buildings. Examples of commercial condo projects in Nashville include 33 Music Sq. West, The 37206, and The Edison.

How Commercial Condos Benefit Small Businesses

Commercial condo projects are beneficial to Nashville’s entrepreneurial community in a number of ways.

Not only do they allow a business to be in control of its own destiny, these condos also offer tax benefits and can become part of your investment strategy.

1. Control Your Destiny

The cost of leasing space certainly isn’t going down any time soon.

In fact, most experts predict that although the Nashville market may slow down in the near future, prices are slated to continue their upward climb. Rising costs of doing business often make it more difficult for small businesses and entrepreneurs to fulfill their passions and still be successful.

Commercial condos allow these individuals to lock in their monthly rates and predict their future.

If you don’t own your location, your tenability is always at the mercy of the landlord.

Regardless of increases of rental rates, we’ve seen landlords simply decide they didn’t want a tenant in their property any longer or, after a tenant had spent tens of thousands on build out and established their bar in one particular location, the landlord took the space back to open their own bar. Investing in your own location will help prevent that from happening to you.

2. Affordability

The beauty of a commercial condo? You don’t have to purchase the entire building.

Most commercial real estate is bought and sold property by property, not suite by suite, so the price tag of entry is often higher than most small businesses can justify.

However, being able to purchase one suite within a building brings down the cost significantly.

Even if the price for a 1,200 sq. ft. office or retail suite is $400 per sq. ft., you’re only looking at a $480,000 investment. With your mortgage payment around $2,750 per month, you’re already below the average cost of renting space at a rental equivalent of $27.50/sf per year.

Check out our commercial calculators to see what you can afford.

3. Tax Benefits

When renting commercial space, you don’t get nearly as many benefits as you will owning the real estate.

Condominium units provide businesses tax advantages on the part of the building they own, such as deductions for property taxes and interest, as well as assessments, utilities, insurance, repairs and depreciation.

4. Invest for Your Future

What is your retirement plan?

Do you think you’ll be running the company for the rest of your life?

Will you sell it and try to live off the proceeds from that sale?

Owning commercial real estate provides you with multiple investment routes, and the beauty is that your business paid for it!

We recommend that our clients own their real estate in a separate entity from their business and lease the suite to the business.

Doing so keeps the real estate off the books for the business and allows the business owner to sell the company and lease the suite to the new ownership, creating passive income for the long term.

Where Can I Find a Commercial Condo?

Commercial condo projects are becoming more and more common in Nashville as the city continues to expand and prices rise. These buildings are often closer to the urban core - convenient for both the business owner, employees, and customers.

The Cauble Group has recently sold a few commercial condominiums around Nashville - including ground floor office / retail at The Volta and ground floor office / retail at The Edison.

We currently have two units available for sale at The Boomerang in The Nations - 1,255 sq. ft. suite on the ground floor ideal for retail or office and a 1,455 sq. ft. 2nd floor walk up suite prime for office space. Several of our clients currently have developments in the works to provide even more commercial condos to the Greater Nashville Area. Contact us for more information upcoming projects.

About The Author:

Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors as a board member for the Real Estate Investors of Nashville. Learn more at www.TylerCauble.com