Retail space on the upper levels stays empty in building after building, and landlords lose out on rent money month after month. Shoppers walk past these storefronts and don’t bother to look up because nothing catches their eye or makes them want to check out the stairwell. Property owners who bought the entire building wind up collecting rent on maybe half of the space if they’re lucky. The upper floor stays vacant and costs them money every month, and they’re stuck trying to see if it’ll ever actually pay for itself.
Shoppers won’t climb even a single flight of stairs unless they have a real reason, and this behavioral tendency has left thousands of square feet sitting dark all across the country. Retailers usually avoid these spaces because they’re convinced that foot traffic will drop dramatically the second that customers have to head above street level. Landlords wind up slashing their asking rents just to bring in anyone at all, and they still have a hard time filling these vacancies, which turns into this self-perpetuating cycle where empty upper floors look unappealing, which scares away the next would-be tenant, which means even longer vacancy periods and forces landlords to cut their prices even steeper just to drum up some interest.
Some buildings actually do manage to fill their second floors and keep them full and profitable year after year. The strategies aren’t that hard when you break them down. Property owners just need to stop treating those second floors like they’re watered-down and cheaper versions of ground-level retail!
Let’s talk about how you can turn that second floor space into a money-maker!
The Problem with Second Floor Stores
Most customers will go to whatever store is most visible from the sidewalk. A second-floor retail space disappears the second a person walks past your building. Then they won’t have any visual reminders that your business is located upstairs, and they’re not going to have much reason to come back and hunt for it later.
A single flight of stairs acts as more of a mental barrier than most shoppers give it credit for. It might only take 30 seconds or so to walk up. But it still feels like work to a shopper, and even that small bit of effort can change their behavior. Decisions about what to buy get made pretty fast, and almost everyone picks whatever option feels easiest right then. If they can find what they need on the ground floor at a different shop, nine times out of ten, their money goes there instead.
This turns into a problem that builds on itself and just gets worse over time. When half of the upper floor sits empty, it tells every customer who walks by that there’s probably nothing worth the trip upstairs. Most shoppers will take one look at the dark windows and figure that the whole level is probably closed down or not in use anymore. The handful of businesses that actually are open on the second floor are in an uphill battle to get any foot traffic because the empty spaces around them make the entire floor feel like a graveyard up there. Low foot traffic starts a vicious cycle. Property owners can’t seem to fill their empty units because the tenants who look at the space are nervous about a shop where there’s hardly anyone around. A business owner will look around and see the empty storefronts and start to worry if their shop can survive if nobody’s passing by each day. It’s a real concern because they know how much retail relies on walk-by customers.
A store at the street level will get seen all day long and also picks up plenty of customers who weren’t even planning to stop in. Maybe a person walks by on their way to grab some coffee and notices a new bookstore that they’ve never seen before – they might just pop in right then and there. Put that same bookstore up on the second floor and almost nobody will know that it exists. The owner has to work much harder just to get customers through the door because the location itself isn’t doing any of the work for them.
Upper Floors Worth The Extra Steps
Second floor spaces work a bit differently than ground level storefronts. You can’t simply wait around for walk-ins to wander in off the street – you’ll have to actively draw customers upstairs with intent. Appointment-based businesses and services that take bookings ahead are actually a perfect fit for this setup.
Hair salons and beauty treatments usually do well when they’re located on upper floors. Appointment-based businesses have a natural edge here because clients already know where they’re going before they leave home. Fitness studios and yoga spaces fall into this category too. Members book their class times, which means these businesses get steady foot traffic throughout the day without having to depend on walk-ins or street visibility.
Co-working spaces work well as second floor retail tenants and they’ve proven to be a reliable option for landlords who need to fill that upper-level space. Remote workers need somewhere to go when they want to get out of the house and actually be productive around others. A coffee shop or restaurant that dedicates its second floor to workspace can build up a loyal base of regulars who camp out for hours at a time (which also means they’re probably ordering multiple drinks or meals throughout the day). What makes this model successful is that you’re giving customers a reason to come upstairs.
Apple has done a great job with this concept in their store layouts. The upper floors are dedicated to workshops and training sessions. Customers register ahead to save their seat in whichever session interests them and when the day arrives, those registered attendees head upstairs to access the content, which gives them a reason to visit the upper levels other than browsing products.
Experience-focused retail has influenced what the second floor spaces can do and it’s opened up options that weren’t all that viable just a few years ago. Restaurants and bars that want to build an experience instead of trying to flip tables fast succeed in upstairs locations. A wine bar with small plates is a great example of this and restaurants that only take reservations fall into the same category. Once customers plan to visit a particular place, they’ll make the effort to find it regardless of what floor it’s on.
You might already have five or six clothing stores downtown in your area. But there’s nowhere for residents to collect and spend time together as a community. Or maybe what your town needs is a dedicated space for art classes or music lessons. The second floor businesses that succeed are the ones that fill a gap in the local market – they give customers access to something they’ve been wanting but just couldn’t find anywhere else in town.
The Tenants That Bring Customers Upstairs
A single strong tenant on your second floor can pull in more foot traffic than a dozen promotions ever will. Medical offices and dental practices work well for this – they bring patients upstairs because patients actually need those appointments. Restaurants with a loyal following do the same. When customers want what you offer or when they depend on your service, they’ll gladly make the climb.
An anchor tenant like this will bring in a steady stream of foot traffic and that’s going to benefit the other businesses on that floor. Each time a person visits, they’re walking past the other storefronts at least twice (once on the way in and once on the way out) – it’s free exposure for those other tenants and they don’t have to lift a finger to get it. A dentist with a packed schedule could mean dozens of visitors passing by your other second-floor spaces every day.
The tenant choice for your upper-level retail space matters and repeat customer traffic is a big part of the reason why. A physical therapy clinic brings patients back week after week for their scheduled appointments. A tutoring center does the same and brings the same families back over and over again. Tenants like these are what actually make your second floor feel like a destination that customers remember and want to return to.
The right anchor tenant will make the difference in how the rest of that floor performs so it matters. Appointment-based businesses are great for this role and businesses with loyal customer followings work just as well. When you have that anchor locked in, the smaller tenants around it can feed off of that steady foot traffic. What used to be a neglected second floor suddenly turns into its own little destination with energy and life.
Turn Your Upper Floors Into Steady Income
Some property owners are starting to see that their second floor space might actually be worth quite a bit more if they stop trying to force retail into every inch of it. Target and Walmart take care of their upper levels pretty well now – they’ve turned them into their fulfillment centers. Their teams process the online orders up there as the customers still browse and shop on the ground floor.
Rental income from offices and apartments tends to stay way steadier compared to what you’ll see from retail tenants. You’ll know in advance what’s coming in. Office leases usually lock in the rates for a few years at a time. Apartment tenants pay the exact same amount month after month, and the revenue doesn’t jump around like it does with retail sales. Predictable income makes it way easier to budget on your end, and the property ends up being far less of a headache to manage day-to-day.
Second floor retail works fine in some situations. When your building isn’t designed for that setup though, you have plenty of other options to make that upper space productive and profitable. The best move for most property owners is to accept what the building does well and then to go find tenants who are actually looking for what you have to offer them.
Price Your Second Floor Space Right
Money is where a lot of landlords have problems with second floor retail, and most of them don’t even know they’re losing cash on these units. Second floor spaces will usually rent for less than the ground level – that’s just how the market works. The best strategy is to stay away from panic pricing and from drastically underpricing them just because you’re worried about vacancy.
The best way to price your space is to work out what it’s actually worth to the tenants who rent from you. Maybe you’ve built out a destination that attracts foot traffic, or maybe you’ve been selective about your tenants and created something worth having. When that’s the case, you can charge rent that shows what you’re actually giving them.
Upper floor lease agreements need a bit more flexibility built into them because the location itself presents different challenges than ground level retail does. Percentage rent deals can work out well here – as the foot traffic grows and the tenant does better, the landlord benefits too. Longer lease terms are something else that lots of landlords like since it gives their tenants enough time to get a foothold and grow a loyal customer base. Every building is different, and every market has its own particular quirks, which means that you should customize how you approach each one.
A lot of property owners assume they need to slash their asking price on the second floor space just because it’s not right at street level. It’s a common way of thinking, and it ends up costing them a fair chunk of money over the course of a lease (or multiple leases). Once you’ve done your homework and found the right tenants for your building, and once you’ve actually made the space accessible to get to, then you can price it based on the value it offers to a business. That might mean it still ends up somewhat lower than the ground floor retail.
A solid pricing model has to make sense for the tenant and the landlord. Tenants have to be able to see a path to profitability, and landlords have to cover their costs as they make a fair return on the space. If the lease agreement can accomplish both, second floor retail turns into a genuine asset for the building.
Convert Your Foot Traffic Into Extra Revenue
Second floor success and ground level success are two different games. A direct copy of what works downstairs won’t deliver the same results upstairs, and it doesn’t need to either. Upper floors have their own strengths, and when they are used correctly, these spaces can be very profitable. Perfect as destination locations, upper floors pull in service-based businesses that customers will actually look for. Mixed-use setups also do well in these spaces and help keep foot traffic steady even when the wider retail market is struggling. The pricing strategy has to account for less visibility compared to the street level, which means that the tenant combination needs to be strong enough to draw customers in on merit alone. Match the right tenant type with the right price point, and the numbers finally start adding up.
Small adjustments to your tenant mix, better wayfinding signage or some reworked lease terms can make a large difference in how well that space functions for you – and you won’t need to pay for a full redesign to get there. It’s always better to map out these kinds of changes beforehand rather than hope that foot traffic will somehow magically find its way to the upper floors on its own.
An ecoATM kiosk could be just what you need if you have underused space on your second floor that isn’t doing much for you. It takes care of two big challenges at once for property owners like yourself. For one, it builds a legitimate destination that gives customers a real reason to visit your upper level. And you’ll be able to add a new revenue stream without having to find traditional retail tenants or handle those lease negotiations. We’ve already worked with thousands of locations to build steady foot traffic and reliable income just by making device recycling more convenient for their customers.
I’d be happy to talk about how an ecoATM partnership could work for your property and help to bring more activity to that second floor. Get in touch today!
