ᐅ 8000 m² Mixed-Use Commercial Space – What Are the Best Ways to Utilize It?

Hello everyone

Here is the situation: my parents own a plot of land of about 8000m2 (of which approximately 6500m2 (70000 sq ft) is within the building boundary) in a suburb of a medium-sized city (a little less than 100,000 inhabitants) in a metropolitan area. Currently, they operate a gas station there among other things. They now want to retire and close the business. The question is: what should we do with the property? It is mixed-use commercial (up to 3 full floors, 1.2 floor area ratio, 0.6 site coverage ratio).

From my point of view, there are four options:
- sell the entire plot (either as a whole or in parts)
- rent or lease it out
- use the property ourselves for commercial purposes or real estate
- a combination of options 1 to 3

My current favorite:
lease about half to a retailer (long-term lease, secure income – there is general interest from several large chains).
On the other half, build one or more residential complexes with as much living space as possible and then rent them out (for example, about 40 units on 3500 - 4000m2 (38000 - 43000 sq ft), rental price around €8.5 per m2 (about $0.90 per sq ft)).

Of course, selling outright is also an option (official land value about €250 per m2 (about $23 per sq ft)), but I am attracted to the idea of long-term capital growth from residential real estate combined with steady income.

What I would like from you:

- What are your general thoughts on the plan? Would you prefer a different scenario? Why?
- Specifically regarding the residential development option: what should I be aware of? Who is the best contact for this?
- Where can I find general information about the economical construction and operation of such a residential complex? What construction costs per m2 should I expect for a project of this scale?
- What is a reasonable timeline from now until the completion of the first/all buildings?
- Is it generally possible to purchase a residential complex of this size turnkey? What kind of workload should I expect as the owner during the planning and construction phase?
- Do the floor area ratio limits apply only to the area inside the building boundary, or is the entire plot the basis?

I know these are many questions, but as you can see I am still at the very beginning of my considerations and look forward to discussing this with you.
Thanks in advance for your feedback.

Question for you: Can you secure financing of 12-15 million euros (€) (approximately 13-16 million USD)? Is your bonus sufficient to cover a cost overrun guarantee of 1.5 million euros (€) (about 1.6 million USD)? Are you able to manage the property?
Do you feel confident about this?

Only then can you continue to focus on this matter.

If not, sell everything to a project developer.

Question for you: Can you secure financing of 12-15 million €? Is your bonus sufficient to cover a cost overrun guarantee of 1.5 million €? Are you able to manage property administration?
Do you feel confident about this?

If so, you can continue to work on the project.

If not, sell everything to a project developer.

Hello nordanney,

Thank you for your quick response. Of course, I need to sort out the financing. In principle, I believe it is covered by the rental income. I have personal equity available in the mid six-figure range. If necessary, I could probably obtain additional funds from the nearby area.

Selling is the worst option for me. The plot has been in our family for several generations. Just because the current business model is not sustainable, I do not want to sell it. I would rather proceed in small construction phases (perhaps 10 residential units) or lease the entire property.

My previous experience is limited to owning and managing a six-family house. Given the planned scale, I would at least want to outsource part of the project.

One idea would be to find a project developer who, in exchange for the land, transfers a certain number of apartments to you. There are models that optimize the property transfer tax in this process. For advice, consult a notary you trust.
Additionally, you might be able to invest more capital with the developer to increase the number of apartments you receive. I think with 8000 m2 (86000 sq ft) there could be investors willing to consider such an arrangement.

If financing a large-scale project is feasible, marketing it directly to tenants is a sustainable approach. A high number of units reduces the risks associated with rental defaults, which also applies to commercial spaces: it is generally better to have several smaller units rather than a few larger ones (though this obviously depends on location, supply, and demand).

Knowledge of marketing and property management is essential but can be outsourced or acquired. The potential size of the property is sufficient to make this a full-time occupation. It is very demanding at the start but can become quite manageable in the long term.