Location, Location, Location-Retail Real Estate

Location, Location, Location
Boring, Boring, Boring


I've been leasing and managing over 20 million sqft of retail space in
36 states for RD management for over 27 years and have gained
substantial experience when it comes to being a real estate
asset manager, so I felt comfortable when the publishers of the Caribbean
Business ask that I write a article, feeling I could use my past's
insight to provide useful information for their readers. However, when
they gave me the topic of Location, Location, Location, I was
bewildered. What can be said about the topic that hasn't been said a
thousand times before and it's such an common topic, that there's
nothing exciting to say, but I'll give it a try.

Everyone knows the expression.: What's the three most important things
in real estate ... Location, Location, Location is the answer.
So what makes a location -+good?

A good location is an location where the consumer will shop more then
another location., it's that simple. But the requirements for a good
location are different if it's urban, suburban, rural or nitch. An
outlet center can be in a secondary location but if it has the right
tenant mix, will draw from a substantial trading area and therefore the
location becomes extremely desirable, even if the physical location is
not. The grouping of excellent retailers made the location work.

Besides different categories having different needs in determing what
makes a great location work, an individual retailer can make a location
"work" for a specialty tenant even if the location is not prime
If there's a "hot" restaurant located on a side block, with limited
traffic except for the restaurant's customers, that
by most definition is a poor location BUT the restaurant might be a
strong enough pull to make the street the food operator is located on an
excellent location for a bakery or dessert operation. The restaurant becomes the anchor/draw for the location.

You can be located in the highest grossing shopping center on the
island, a center that literally draws from every part of the island and
still not have a location that is suitable to your type of business. You
can be in the best shopping center but in a secondary location and not
be able to generate the traffic you need to substantiate your operating
costs. You also have to make sure the consumer traffic is your type
of customer. You can be located between Banana Republic and Ann Taylor
and still not be able to sell your merchandise because the consumer
traffic generated by Banana Republic and Ann Taylor is not the
customer base that your merchandise would draw from. If you are selling
discounted merchandise you want to make sure that the are you are
located in is drawing the customer looking for the discounted
merchandise.

Finding the low hanging great locations is easy; everyone know where the
"hot spots" in retailing are and if you don't know, ask any competent
broker or retailer operating in the market and they'll tell you. It's
not a secret.
The problems to great real estate locations are two fold however; first,
even if you know where the great locations are, that doesn't mean you'll
find an available spot and if you do, will the rent be at a number you
can afford? Sometimes, a secondary location can be more profitable then
a primary. The bakery located near the "hot" restaurant can do excellent
volume, because of the traffic drawn to the restaurant, the same or more
volume then a location in a prime area but that doesn't mean two
bakeries could 'work" on the street even through several bakeries can
survive and prosper in a tradional great location, so the determination
of great real estate can vary by the individual tenant needs. A BTB
retailer has a totally different set of criteria then a consumer
oriented one. Prime locations for a BTB retailer could be in an
industrial park, yet tradional retailers would fail in the same location
The business oriented buyer is willing to drive further or go to more difficult locations because they carry merchandise not available elsewhere, therefore location is not quite as important. Determining what's right for your business is the hard part. If your at
the corner of main and main, there's less pressure on your business to
spend quite as much on advertising and usually it's easier to attract
personal. The larger chains, as a rule of thumb have to take better real
estate because the caliber of their managers are not as strong as the
local merchant, where the owner is directly involved. The better real
estate makes the chain less dependant on the manager but more dependant
on the location. There's an expression in retailing; it's easier to change managers then locations
Local tenants are more dependant on it's ownership for survival.

Through outstanding marketing/advertising, having a better selection of
merchandise and knowledgeable personal, a local retailer can take a
secondary location and make it first class. The savings on rent per sq.
Ft. Can run $10-15 psf or more and in the secondary location, the
merchant can demand and receive better lease terms then that in a prime
location, important items such as term, options and tenant improvements.

Location, Location, Location, a simple concept with a difficult answer on where and what it is