Appraisers and lenders call it external obsolescence, and it’ll lower the value of your Commercial property accordingly.  Blight makes the surrounding commercial properties less desirable in multiple ways:

* Customers may be turned off and turn away from a business district.

* Business owners may steer their searches for their next store front or office location away from a blighted location.

A lack of desire to shop in a blighted location, rent space or purchase a building, not only affects the value of your commercial property when you own a building in that location, but you could consider it a negotiating tool if you’re negotiating a lease for space there.

We had a conversation this morning with a local business owner about blight.  She’s been growing her business over the past four years and in a particular downtown location over the past 9 months.  She’s rapidly outgrowing her current small studio/office space and she has her eye on a recently-vacated storefront across the street from her current location.  In fact, she told us that the more she thought about it, the more excited she became to make it happen.

Our conversation arose out of her possible need for a business line of credit to finance the acquisition and renovate the new storefront.  We pointed out the adjacent vacant location as we stood upstairs at her studio looking out at the street and the other thriving businesses in the area.

The worst news about this particular blighted location is that pretty much every other business owner in the area knows about the owner of this building, about how it’s been vacant for over a year, and about how that owner has never truly cared for this property’s external and maintenance appearance.  Some business owners banded together and filed complaints with the local economic development council.

Frustrating for those business owners, yes, but we suggested a negotiating opportunity for our potential business financing client.  We suggested she snap a photo of the blighted storefronts and present those to the property manager of the storefront she wants to rent when sitting down to complete lease negotiations.

The fact is, as too often happens in a blighted location, there are business owners seeking to be in that location and willing to ignore the blight and hoping that potential clients/customers will also ignore it.  In this instance, this business owner has had wonderful success with her customers on this blighted street.

So, she’s invested in the location already.  Her desire to grab that storefront and move her business to the next income-producing level isn’t clouding her judgment at all, but it certainly helped her forget about the nasty looking storefronts.  We pointed that out to her and made the negotiating suggestion.

Visit our Financing Fodder YouTube Playlist for more information on how to prepare yourself when requesting a business loan.