May 11, 2009

Real Estate With a PastBy Rob JohnsonOnline.WSJ.com

There’s an empty space in a North Dallas strip mall that’s a proven good spot for a business, says commercial real-estate agent Dane Thomson.

Trouble is, when prospective renters look at the space, all they see is an empty storefront, old bathrooms and the worn sign of a brand whose time has passed: Natale’s, a restaurant that for 17 years drew crowds with its homey pot roasts and soups—but that closed when a new, inexperienced owner took over. The location, Mr. Thomson says, has been vacant for about a year.

For any small business looking for a new location, empty space like this raises an often-asked question: Is it smart to venture into a spot that a previous business abandoned—a spot that may be carrying a bit of baggage?

It depends, say small-business consultants and commercial real-estate agents. Always research the background of space that’s up for rent or sale, they say. There’s a story behind almost every available storefront or former restaurant. Maybe the previous tenant left due to poor management, ill health or a divorce—and through no fault of the site itself. But if there’s a problem specific to the location, then, as philosopher Edmund Burke is often quoted, “Those who don’t know history are destined to repeat it.”

Investigating the reason for the last tenant’s exit is essential, says Scott Bloom, a New York City commercial real-estate agent who specializes in Manhattan properties. “Smart businesspeople ask about attractive space that may seem all too available. They want to know, ‘Why am I so lucky?’ And they should wonder.”

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