Location, Location, Location!

But, what is the right one?

We’ve all heard the old adage: What are the 3 most important things regarding commercial real estate,, Location, Location and Location! The problem is, what is the right location for your business? Main and Main might not be the right location for your business. So often, you as a prospective tenant may not really know where the right location for your business is. Sometimes the criteria for identifying the right location are different for a particular community. For example, most experienced tenants who have many locations across the country will have very specific criteria. These criteria may include such exactness as which side of the street and on which end of an intersection. They may know exactly how many feet from the intersection they might need to be and what the minimum automobile traffic count per day must be.

Often in the city where we work (Branson, Missouri), we need almost first and foremost, to understand the exact nature of the tenants business before we are able to correctly identify the right location. One great example was a specific nationally known retailer who sent their professional real estate department people to town to identify the right location. The pros searched the available data and virtually matched the very precise location criteria to a “T”. The traffic count was in excess of all other options and met the minimum criteria for their business. The relative location to companion tenants that the company had identified as the perfect neighbor was next door. The side of the thoroughfare was correct with regard to the location of their target market. And the cost of the space was within the budget. Perfect, they had identified the triple threat- “ Location, Location, Location”. But, by not consulting a local professional or moving here and living here for a period of time, they made one major mistake. They neglected to identify the correct target consumer habits and challenges. You see, they sold a product that small businesses and even individuals would buy for use at home. Unfortunately, their “perfect” location was an area the local patrons did not frequent and seldom would drive to if given a choice. The huge traffic was mainly tourist traffic. Tourists were one segment of the market that would be very unlikely to buy the products offered by this company.

Selection of location is also going to be very dependant upon the amount of money that a business can typically budget for rents. Just like home buying, different location will effect the rent rate required by the Landlord. Identify the percentage of gross revenue that you will be able to budget toward rent. Identify the potential revenue for each location and weigh the results. Sometimes the perfect location at first glance is not the right choice. If your particular product is such that the “perfect location” will increase sales potential and therefore net revenue by $ 10,000 per year, and rent is $14,000 per year higher than the other choices. That “perfect location” might not be the right location.

When considering the right location, keep other factors in mind.

Where are my competitors and does it at all help me to be near them or away from them. Competition is not always bad. Most of us realize, the fast food chains all seem to be located in the same area. That’s not because they all bought or leased at the same time and none knew about the others. One led and the others followed. These businesses know that competition means choices and choices for the consumer mean more frequent visits and each believes they can achieve their share of the market place. It is seldom an accident.

Who is my customer and which location is likely to be more accessible to that customer? Once again we need to examine the product or service your business sells. Then who really is the typical customer? Easy examples of this would be a store that specializes in lawn and garden supplies like riding lawn mowers and garden tillers. While there are a few commuters in a big city like Manhattan, NY. It would be a poor choice of location to place an 8,000 square foot Lawn & Garden Store on Fifth Avenue. Now why would that be a poor choice? After all, Fifth Avenue is by far recognized as the premier avenue for retail shops. The patrons on Fifth Avenue are very wealthy and riding lawn mowers are expensive, seems like a great combination. The traffic count is huge and the walking traffic is almost impossible to top. Of course most of us recognize the problem, the patrons there, for the most part, don’t have lawns to cut.

Now your business has similar issues to deal with. In the case of Branson, we need to find out who really is your customer or who will most likely be your customers, when will the most likely time be that they will visit your establishment, and maybe, how are you going to get them to come to your establishment. Other bits of information that will help determine the right location are, who would be the best neighbors for my business, will most of my customers come due to an impulse, walk-in type customers or are they sent to me from another source, and maybe, how long will my customers be at my establishment and will the parking be adequate for them or will they be hesitant to visit because they don’t want to fight traffic. These are some of the things we need to establish to evaluate the locations available and determine the right location for your business.

Often there are no perfect choices. Sometimes the rental rate will not allow you to select the best space or the absolute best location has no available space or will not rent to another one of your type of businesses. This is why a complete evaluation of all the acceptable locations is always a very good idea.