Outparcel An outparcel, also known as a pad site, refers to a standalone piece of commercial real estate located on the perimeter of a larger development such as a shopping center, retail park, or mall. Outparcels are typically used to house free-standing businesses like fast-food restaurants, banks, or gas stations. These sites are designed with their utilities and access points but benefit from the traffic generated by the larger adjacent development.
Examples of Outparcels
- Fast-Food Restaurants: Many fast-food chains prefer outparcels because it allows them to capture the attention of people entering and exiting the main shopping centers or traveling along busy roads.
- Retail Stores: A retail outlet such as a specialty store or a quick-service retail store often uses outparcels to capitalize on high visibility and easy access for customers.
- Financial Institutions: Banks frequently use outparcels since it provides them with standalone buildings and drive-through services, making it convenient for patrons.
- Gas Stations: Gas stations often position themselves as outparcels to capture the drive-by traffic and serve customers with ease of access.
Frequently Asked Questions (FAQs)
What is the primary difference between an outparcel and an inline store?
- Outparcels are standalone buildings on the peripheral of a larger development, while inline stores are attached units within a shopping center’s main complex.
Why do businesses prefer outparcels?
- Businesses prefer outparcels for their high visibility, ease of access, and the ability to build structures that meet specific operational needs without sharing walls or infrastructure with adjacent businesses.
How are outparcels beneficial for developers?
- Developers can monetize otherwise underutilized sections of their property, attracting businesses that prefer standalone locations and increasing the overall value and appeal of the main development.
Is an outparcel the same as a pad site?
- Yes, the terms “outparcel” and “pad site” are used interchangeably in commercial real estate.
Related Terms
- Inline Store: A store within the main structure of a shopping center, typically sharing walls with adjacent stores.
- Anchored Center: A shopping center that includes one or more major retailers known as the “anchor” stores, which draw significant customer traffic.
- Triple Net Lease (NNN): A lease agreement where the tenant is responsible for paying real estate taxes, building insurance, and maintenance in addition to rent and utilities.
Online Resources
- Investopedia: Triple Net Lease (NNN)
- LoopNet: Retail Leasing Guide
- Real Estate Investment Trusts (REITs) Articles: National Association of Real Estate Investment Trusts (Nareit)
References
- Geltner, David, et al. Commercial Real Estate Analysis and Investments. South-Western Educational Publishing.
- Linneman, Peter. Real Estate Finance And Investments: Risks and Opportunities. Linneman Assoc.
Suggested Books for Further Studies
- Real Estate Finance & Investments by William B. Brueggeman and Jeffrey D. Fisher
- The Handbook of Commercial Real Estate Investing: State of the Art Standards for Investment Transactions, Asset Management, and Financial Reporting by John McMahan
- Foundations of Real Estate Financial Modelling by Roger Staiger
Real Estate Basics: Outparcel Fundamentals Quiz
### Which best describes an outparcel?
- [ ] An inline store within a shopping center.
- [x] A standalone property on the perimeter of a larger development.
- [ ] A residential unit in a commercial area.
- [ ] A small office building in a corporate park.
> **Explanation:** An outparcel is a standalone piece of commercial real estate located on the perimeter of a larger retail or commercial development.
### What type of businesses often occupy outparcels?
- [x] Fast-food restaurants, banks, and gas stations.
- [ ] Large department stores.
- [ ] Residential apartments.
- [ ] Shared office spaces.
> **Explanation:** Outparcels are commonly used by businesses that benefit from high visibility and standalone locations like fast-food restaurants, banks, and gas stations.
### What is another term used for outparcel?
- [ ] Anchor Store
- [ ] Inline Store
- [x] Pad Site
- [ ] Freehold Site
> **Explanation:** An outparcel can also be referred to as a pad site in commercial real estate terminology.
### Why might a developer choose to create outparcels within a larger development?
- [ ] To reduce overall traffic to the main complex.
- [ ] To create residential housing.
- [x] To monetize sections of property and attract businesses needing standalone locations.
- [ ] To limit visibility of established businesses.
> **Explanation:** Developers create outparcels to monetize otherwise underutilized sections of their property and attract businesses that benefit from standalone locations.
### Who primarily benefits from the high visibility and easy access provided by outparcels?
- [x] Businesses requiring standalone facilities.
- [ ] Tenants within inline stores.
- [ ] Residential home owners.
- [ ] Public infrastructure projects.
> **Explanation:** Businesses requiring standalone facilities like fast-food restaurants, banks, and retail stores benefit from the high visibility and easy access associated with outparcels.
### In a commercial development, where are outparcels usually located?
- [ ] At the center of the development.
- [x] On the perimeter of the development.
- [ ] Below ground level parking.
- [ ] Adjacent to residential units.
> **Explanation:** Outparcels are standalone buildings located on the perimeter of a larger commercial or retail development to maximize visibility and access.
### Which type of lease agreement might a tenant on an outparcel consider?
- [ ] Gross lease
- [ ] Percentage lease
- [x] Triple net lease (NNN)
- [ ] Month-to-month lease
> **Explanation:** Tenants on outparcels might consider a triple net lease (NNN) where they are responsible for property taxes, insurance, and maintenance in addition to rent.
### For an outparcel to be effective for a fast-food restaurant, it needs to have:
- [x] High visibility and easy access.
- [ ] Charges low rents.
- [ ] Offers shared facilities.
- [ ] Includes attached residential units.
> **Explanation:** High visibility and easy access are critical for the effectiveness of an outparcel for a fast-food restaurant to attract customers easily.
### What distinguishes an outparcel from an inline store in a shopping center?
- [ ] It's rental agreement.
- [ ] It shares walls with neighboring units.
- [x] It is a standalone property.
- [ ] It has a lower square footage.
> **Explanation:** An outparcel is distinct from an inline store because it is a standalone property rather than a unit sharing walls within the main shopping center complex.
### Can outparcels be used for residential purposes?
- [ ] Yes, they are commonly residential units.
- [ ] Only in rare cases.
- [x] No, they are typically for commercial use.
- [ ] Yes, if zoned correctly.
> **Explanation:** Outparcels are typically designated for commercial use and are not generally used for residential purposes.
