HOUSTON-A recent retail report from Colliers International's Houston office indicated that the retail vacancy slipped below 7% area-wide. What was interesting about this trend, according to Colliers' director of market research Lisa Bridges, is that religious organizations are leasing some of that retail space.
"Churches have been leasing retail space as overflow, and also for expansion purposes," she tells GlobeSt.com, adding that this seems to be a trend for church groups interested in branching out into Houston suburbs. "They may not lease for a long time, but for long enough to put together a congregation, then branch out into the suburbs," Bridges adds.
The most well-known example of a Houston church repurposing a property for its own uses is Joel Osteen's Lakewood Church, which is housed in what was once the Compaq Center, home to the Houston Rockets NBA team, as well as other professional sports teams. But Houston is not alone in the religious real estate repurposing trend. Experts tell GlobeSt.com that, for many reasons, religious organizations are finding retail space – and even warehouse space – preferable to buying and building when it comes to expansion.
Gary DeClark, managing director with Chicago-based Integra Realty Resources points out that this trend isn't exactly a new one, but it does seem to be increasing. "I'm seeing it on multiple levels and with multiple congregations, from the storefront missionary Baptists, to large warehouses containing megachurches and everything in between," he observes. Many times, he continues, the church organizations will rent large spaces, such as warehouses, then buy them.
Franklin Street director Adam Foret agrees, pointing out that, during the past three or four years, there have been plenty of churches looking for retail space in shopping centers. "Generally, these congregations are working out of a house and they want to look at a retail shopping center to grow their congregations," say Foret, who is based in Jacksonville, FL.
One cause for this trend can, of course, be traced to the economy. In the aftermath of the Great Recession, retail landlords wanted to backfill space, especially the big-box space. Waiting in the wings, notes Matt Messier, were religious organizations. "Landlords were in a pinch, and the functionality works great for the churches," says Messier, a principal with CNL Religious Brokerage Services in Orlando, FL. "They're big box, air-conditioned, and there's enough room for them to build classrooms." Additionally, the locations had good access and visibility. "Because there were no other community players around, they could sublet space and get a good discount, or do a short-term lease," Messier adds. Furthermore, these organizations have ended up acquiring the entire shopping centers. "They can build them out, keep five or six local tenants, and it brings in income," Messier comments.
Other than economics, other reasons have driven the retail/church trends. DeClark points out that religion-specific real estate can be difficult to re-adapt when it comes time to sell. For example, "a Muslim mosque requires a center area for kneeling, compared to a Catholic church, which has a lot of ornate appointments, stained glass and pews," he says.
Add to this scenario is that a lot of the mainstream religions are contracting, while the lesser ones are expanding. "Adaptations between religious buildings are difficult," DeClark says. "Plus it's easier to walk away from a lease than it is to walk away from an owned building."
Plus, Messier comments, shopping center locations tend to be more comfortable for potential parishioners who aren't used to attending churches. "Being in a shopping center or former movie theater gives churches a new way to deliver messages," he says.
It doesn't mean, however, that a religious organization has an automatic "in" when it comes to repurposing of space. DeClark points out that zoning can be an issue. Furthermore, while congregations might want a shorter lease, landlords might not be amenable to that desire.
Also, Foret adds, landlords may not be fond of religious organizations leasing space because of revenue issues (pro formas don't come from sales, as with other tenants).
Then there is the lack of foot traffic on days other than Sunday. "Churches have worship on Sundays and maybe something on Wednesdays," he adds. "But they don't bring people into centers otherwise. Depending on the center and space, the landlord will treat it like any other retailer from that standpoint."
Furthermore, some national retailers may not be too fond of their religious neighbors. "The churches can use a lot of parking, and not provide a whole lot of benefit for other tenants," Foret remarks.
Messier agrees that there is some merit to the landlord and tenant concern about foot traffic and parking. He also points out that many churches are going beyond the Sunday-only usage. "They're providing day care for kids, or counseling," he says. "Sometimes they have events, or mid-week services." And following those activities, "they're going to the grocery store, or looking at shoes or the local Hallmark store in the center," Messier says. "What's happening is that people are coming to the church, then going to the shopping centers."
The experts believe that the religious organizations will continue being creative with different types of space, especially the retail side of it. "I don't see this slowing down any time soon," Foret comments.
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