Lease your strip center to a head shop

Real Estate Investor · Austin, TX · Member since 2010 · 7 posts · 0 votes

Would you lease a part of your strip center to a head shop (tobacco shop that sells pipes, vapes, and related items)? Their existed stores seemed nice and well decorated with the theme. But its presence could be allergic to other tenants and their customers.

With weeds became more legalized across the country these stores may not as taboo as they used to be. But I would like to hear from investor experiences. This question is pertaining to Dallas Metroplex area.

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Joel OwensBusiness Member

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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes

Not me personally. You have to look at the tenant and ask ( Is it a good fit for the center in general? ). An exception for example could be a really old retail center where you have a tattoo shop already where it might be a fit there.

When I see retail centers there are certain tenants that tend to be non-optimal. Mattress stores, vape shops, Indian restaurants (strong smells can linger over into other tenants units because of the strong spices) unless special filtration exhaust equipment, churches ( lenders do not like giving loans as the tenants can be problematic), some gyms unless operator has very high net worth with personal guarantee.

If the space has been very hard to backfill with lots of possible tenants passing then may be worth a look. If the center is really nice but has one marginal tenant like a vape shop I will look to see if they are paying below market rent. In that case if they go out it can be a benefit later on. If the landlord in exchange for paying TI's had the tenant sign an above market rate lease on a business that might not exist in a few years because of regulatory pressures from the government then it's a no for me usually.

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Joel OwensBusiness Member
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Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
6y
Not me personally. You have to look at the tenant and ask ( Is it a good fit for the center in general? ). An exception for example could be a really old retail center where you have a tattoo shop already where it might be a fit there.
When I see retail centers there are certain tenants that tend to be non-optimal. Mattress stores, vape shops, Indian restaurants (strong smells can linger over into other tenants units because of the strong spices) unless special filtration exhaust equipment, churches ( lenders do not like giving loans as the tenants can be problematic), some gyms unless operator has very high net worth with personal guarantee.
If the space has been very hard to backfill with lots of possible tenants passing then may be worth a look. If the center is really nice but has one marginal tenant like a vape shop I will look to see if they are paying below market rent. In that case if they go out it can be a benefit later on. If the landlord in exchange for paying TI's had the tenant sign an above market rate lease on a business that might not exist in a few years because of regulatory pressures from the government then it's a no for me usually.
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Scott Mac
Austin, TX · Member since 2019 · 5k+ posts · 5k+ votes
6y
No.
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Matt R.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
6y
In LA, these smoke shops share virtually any other type of business along side. Starbucks, UPS, Autozone in same locations. No smoking policies keep the air same as if they were not there. Perhaps Austin is close to same. Good luck!
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Nick Gann
Real Estate Agent · Murfreesboro, TN · Member since 2019 · 194 posts · 181 votes
6y
@Quang L.
Do you like money? If so, then yeah.
Its a good business, and generally smart folks run them. Make friends and moneh at same time!
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Evan Polaski
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
6y
It really depends on the tenant mix, quality of asset, and neighborhood. I used to work on retail real estate, and your tenant mix is key. Ideally you get complimentary stores, and all will prosper together.
I have seen tobacco stores do well in strip centers, but typically, my limited experience with head shops are low sales, low credit tenants that are used to fill a space, which can be short sighted.
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