Finding the Right Retail Location Part III
Finding the Right Location.
In the previous two entries on finding the right location, we talked about the different types of places that might be right for you and in part 2, we discussed in more detail finding the right location.
Now we will assume you know the type of business you want, and now you know in general the type of location that will work for you.
Suggestion: Do not be in the position that only one type place or location will work for you. You are putting yourself in a corner that in the long run could ruin your business or create major headaches for you.
There are three general types of ownership of centers. Since they pretty much have the advantages and disadvantages are basically the same, I will discuss those in general.
This is an easy one, as someone in the local community has ownership of the complex. This type of ownership is becoming none existent in todayâ€s real estate market but there is still some out there.
The developer who originally built the facility still owns a majority interest in it. Some developers will hold onto shopping centers they build and other will sell them once they are done.
Real Estate Investment Trust (REIT):
Many shopping centers these days are owned by Real Estate investment trust. You can invest into some REITS on the stock market. There primary focus is to give dividends to their stockholders or partners.
There are other forms of ownership that a center may have but this gives you a general idea. Overall you will usually be dealing with a local management company rather than the actual owner anyway.
If you have followed my writing you will know what I am going to tell you to do next: thatâ€s right research!! You can either do it yourself or pay a consultant like me to do it for you (but it will cost you and if your starting out do the research yourself).
Find several places that will fit your needs and do the following things:
- Count the number of stores in the center. What is the percentage of national to local retailers? Watch traffic on a typical weekday, Saturday, and Sunday. I would also recommend you watch traffic at several different times of the day to see how it varies.
- If there are other local tenants in the shopping center see how they get along with the landlord and how quickly he responds to issues. You can also check with some of the major tenants but often they will not have day to day dealings with the landlord only their corporate offices will.
- Check how many vacancies the center has, and find out how long some of the stores have been empty. Are they filled fast or have some stores been empty for a couple of years?
- If you have a business newspaper in your area, read it for a couple of months and know what is happening in the real estate area. Also read your local newspapers, which like the business journals will have information on new developments, so you can see where the trends are going.
Now that you have done your homework, you have found a couple of shopping centers that will work for you (the more that will work the better), now you will contact the leasing agent and work out deal to rent a place. As I mentioned in my rundown of types of centers, there are some centers that will not want you because you are not a national retailer, however if you have done the homework, you will have general idea of who will want the local retailers.
A couple of things to look out for: If the leasing manager is too eager to have you rent or doesnâ€t seem to care if they rent to you or not.
If the leasing agent seems desperate you be warned. There might be something happening that you do not know about. The center could be up for sale and once it is sold your out the door as a local retailer, or the leasing agent knows a new center is going in down the road that is going to steal traffic and hard the business in the center. However, you can lower this problem by studying what is happening in the area and reading the newspaper and trade journal.
The next area of concern is if the agent doesnâ€t seem to care if you lease space in their complex or not. Once again by doing research you should be able to eliminate some of the potential problem centers but not all. If the agent doesnâ€t care if you lease or not, what will happen if there is a problem? Will he be there to fix it? Sadly there are some owners who just donâ€t care or are trying to milk a center. I worked for one company (a Fortune 100 Company) that was told by the manager of a REIT owned shopping center that he could care less if we where a tenant or not, and if we could just move out because he could care less if we where there (many of the tenants had moved to a new shopping center that was built a couple of miles away and this one was fading fast).
Be sure to ask the leasing agent many questions and see how he answers such as:
- What kind of response time can I expect if there is a problem with the building such as roof leaks?
- What kind of upgrades are you planning over the next year?
- Is there any pending litigation involving my building (I was involved in a incident where the county allowed the developer to build a wall for a tenant and the neighbors behind filed a lawsuit. Several years later the neighbors won the suit but the developer had sold out to a REIT, a city had annexed the area, and the original tenant had closed. The new tenant is now being forced to move to another location to satisfy the lawsuit even though they where not involved but they where in the building).
Before signing the lease I would also recommend you take the lease to an attorney to look it over. Always cover your back; the property owner will have plenty of attorneyâ€s watching their backs so make sure you have an attorney look everything over. It is worth the cost over having issues in the long run.
It seems like a lot of work but your goal is to build a successful business so the work will pay off. But once the lease is signed then the real fun beginsâ€¦.
This is by no means a complex list of what to do. It is trying to give you a start into the wonderful world of retailing/running a business. Read more and continue looking at this blog for more ideas and articles that may be of interest.