My definition of a “misfit” tenant is an office or industrial user that is allowed into a space that does not fit the use of a traditional office or industrial tenant. In softer markets landlords may attempt to maintain occupancy by going a little further than giving attractive concessions. When a landlord crosses the line and closes a deal with a misfit tenant, the entire building (including the tenants) can suffer.
Characteristics of misfit tenants for office space can vary based on the building, but the most common misfit tenants are the following:
Salons and Barbershops – Salons use a lot of utilities, require a lot more build out, and really thrive much more in a retail or mall environment where they benefit from the exposure and foot traffic. If you walk into an atrium building immediately smell perm, weave, and shampoo…You guessed it! There is a “misfit” tenant in the building.
Deli w/out proper ventilation – Deli’s are great, most of the time. A deli without proper ventilation can have an entire building smell like a greasy kitchen inside of a month!
Pain Clinics (Drug Centers) – These centers thrive in unregulated class C buildings where they can get away with the sometimes inappropriate or illegal activity that goes on there. I have seen a quite few reports in my years in real estate of thefts, break-ins and even shootings where these centers have been located.
Educational Institutions – High traffic and density are two of the major problems with these institutions in many buildings where educational institutions are located in the Houston market. Most office buildings are designed to accommodate about 4-5 parking spaces per 1,000 sf of space. Just one classroom alone can easily take up many of the prime/non-reserved parking that tenants would like reserved for their own visitors.
Call Centers – Call Centers share the same issue as educational institutions including a high amount of visiting traffic and heavy parking lot usage. Occasionally neighboring tenants will complain about call center employees coming to work in pajamas and slippers. You may laugh–but I have seen it in person. Some buildings are a great fit for call centers in Houston.
Buildings with the right tenant mix really add value to all of the tenants. At the end of the day, a “misfit” tenant has just not found the right fit for their industry and needs to make a change. Many times, this change will ultimately make them a happier tenant as well because they will have found a better fit.