Considering opening a retail store? How do you go about finding a retail location for your store?
Here are a few steps for finding that perfect location.
Instructions
1. Define your vision: If you have not already done so then describe the vision that you have for your store. Will your store have a classic look with wood floors or an industrial look with exposed air ducts and concrete floors? What type of music will you play? Are you trying for an upscale shopping experience or a casual experience. Write your vision down on paper (or in your business plan if you have one).
2. Describe your customers: The optimal store location is directly tied to your customer base. For example, if you want to target families then you need to look at power centers and shopping malls where a family can do one-stop shopping. We have found that a Walmart and Target lure customers on the concept of one-stop family shopping just as much as they lure with low prices. For a small store it is important to place yourself in a location where your customers will shop for essential items. If your customers tend to drive less than 5 miles/day then you need to position yourself within their 5 mile radius or within walking distance. If you sell products that are also sold by discounters (albeit you will offer superior customer service) then you should avoid sharing the shopping center with discounters.
3. Do your own research: The best resources for doing your own research are (1) talking to other retailers in the shopping center that you are interested in, (2) utilizing online resources such as cbre.com, (3) join a local business organization to discuss local retail locations, (4) obtain a crime report for the area as you may be working late on many occasions and you want to feel safe and (5) get an understanding of retail spaces with high turnover.
Type "commercial real estate" into any search engine to see a list of the large commercial real estate companies. Most commercial real estate companies offer free listing search capabilities on their web sites.
Retail spaces with high turnover may have high turnover due to being a bad location for any type of business. Or it may be that the right business will flourish in that typically bad location.
To understand what makes a bad location you need to consider things such as access to the shopping center, ease of exiting the shopping center, distance between anchor stores, whether the shopping center caters to walkers or drivers, visibility of the space during each of the four seasons (do trees cover up the store signage in the spring), safety of the center, availability of marquee signage, etc.
4. Retain a commercial real estate broker: A broker can be your best friend in the search for commercial real estate. An experienced broker has typically lived in the area for many years and has inside information about each property that you are interested in. Try to find a broker who represents you, the tenant, and not the owner of the property. Once you retain a broker by way of a formal contract or even a handshake you need to use that broker exclusively for that area. Ultimately, a broker wants a commission out of your deal but they also want to retain you as a future customer. They will do their best to broker a fair deal for both you and the landlord.
5. Timing is very important: During slow economic times you will find that negotiations favor the tenant in terms of lease rates and things such as free rent periods. This is not true when the economy is thriving. Understand the current economy when choosing a retail location because you may be able to get a bigger space or nicer space than you had originally hoped for.
6. Study demographics for each location: Demographics are typically provided for each shopping center. They clue you in to the type of customer that you might expect to shop at your store. Keep in mind that demographics are typically two years out of date and reflect averages and can be misleading.
One scenario where this is especially true is when an affluent neighborhood is near your shopping center. The residents are retired and living off fixed incomes that may be lower than the target you have set for your customer base. You need to consider other factors such as what percentage of the residents have paid off their mortgages and cars. Expendable income is what you are looking for. A customer in this situation may have $2000/month of expendable income even though they are only receiving $3000/month. As a contrast, a younger family earning $10000/month may not even have $500 in expendable income each month.
7. Choose the size of your space wisely: Many small businesses look for a space between 800 and 3000 square feet. Others may need 5000 square feet. When you start looking at future growth of your business and you currently need 5000 square feet you might want to consider looking for a space that is 10,000 to 15,000 square feet. The cost of a 10-15,000 square foot space is often comparable to the cost of a 5,000 square foot space. You may pay $2.50/sq ft for a 5,000 sq ft space for a total of $12,500/month. A 10-15,000 sq ft space can be 40-60% less per square foot than a smaller space. For example, a 10,000 sq ft space for $1.00/sq ft is only $10,000/month. Large spaces can be harder to lease than small spaces.
Tags: shopping center, commercial real, commercial real estate, real estate, square feet, your store