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Retail Site Selection

Posted by capital on December 19, 2017
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Retail Site Selection – Many new retailers looking for space for the first time are exceedingly and narrowly focused on the rental rate. While planning conservatively and within a reasonable budget is always smart, retailers need to include other components of site selection retailers that are just as important.

Know Thy Customer

Knowing the customer is the prelude to any retail site selection. Premier retailers such as Starbucks and Target have developed precise customer and location profiles by combining hundreds of data points including historical customer sales data and detailed shopping demographics. They apply a sophisticated scoring system to each potential new location they consider for expansion. New retailers won’t have such elaborate profiles but still can create their own grading system by assigning a score to elements such visibility, access, daytime population, household income, and traffic counts. A minimum acceptable score can be applied as a guideline helping a retailer avoid poor performing locations.

Know Thy Location

Focus on where you can do the most business when evaluating locations. How much rent a retailer can afford is directly related to the sales revenue generated.  We recommend to our clients to evaluate expensive locations if higher sales are projected as a return on investment.

Know Thy Market

It pays to know the current leasing market so retailers will know if the landlord’s asking rates are reasonable. Additionally, having several qualified choices readily available as a backup helps alleviate the frustration if lease negotiations break down on the first choice.

Know Thy Neighbor

Retailers should know who all of the co tenants are in any shopping area they are considering. Foot traffic generated by synergistic or potentially competing co tenants can mean boom or bust to sales. Anchor or large tenants usually establish the basic customer profile, but the type of smaller tenants is as important.  For example, In Federal Realty’s Bethesda Row project many would consider the anchor tenant as Barnes and Noble but the Apple store, while ¼ of the size, is a major draw helping other nearby tenants and business.

Know Thy Landlord

Retail lease terms are for at least five but more commonly ten years committing landlord and tenant to a long term relationship. It is essential to know who owns and who operates the property. Researching the track record of a center’s ownership and management company is a prudent element in decision making process before making a final decision. We find existing tenants in a shopping center are open to sharing their opinions and experience in the center, the owner/management, as sometimes even how their business is performing.