Single-Tenant Properties
Income-producing commercial properties can be either single-tenant
or multitenant properties. In the lexicon of commercial real estate,
the term “single-tenant” always refers to a landlord-and-tenant relationship,
even though it may appear that the building is owneroccupied.
Single-tenant properties are solitary free-standing structures,
built on single parcels of land. Most single-tenant properties have
long-term leases because of the specialized use and design of the
property. These properties are usually leased prior to their construction
and are rarely built based on speculation. A developer will
agree to develop the site or construct the building in exchange for a
long-term lease with the tenant. You probably have seen those signs
posted on vacant tracts of land that read “Build to Suit.” What that
means is that the owner of the land, usually a developer, desires to
build a structure specifically for an end-user who agrees to lease the
property from the developer for a specified amount of time, say ten
to twenty years. The developer will spend his or her own money to
construct the building and then will lease it to the user. Rarely will
a developer build a single-occupant building without having first
entered into a contract with a specific user who agrees to rent the
property after construction. This is the only scenario in which a
lender will give the developer the construction loan. Unless a developer
has more than enough cash sitting in the lender’s vault to cover
the loan, a typical lender will rarely loan money for the construction
of a speculative building. Examples of income-producing singletenant
properties include the following:
Toys ‘R’ Us Bed Bath & Beyond Hobby Lobby Big Lots
Walgreens Kohl’s Dollar General Garden Ridge
Best Buy CVS Pharmacy Academy Firestone Tire
Costco Blockbuster Video Staples Office Depot