Common Mistakes New Tenants Make In Site Selection

I frequently represent Maryland real estate leasing clients looking for retail spaces for their businesses.  Often, they start off with dreams of leasing the most prevalent space in the most popular shopping center in town.  There’s good reason for that, of course.  They want the traffic that such a great site will bring them, and the much greater shot at success that such a location brings.

Too often, when I begin to show them spaces, they eventually start to ask about secondary retail locations, and then they ultimately concentrate on those spaces exclusively.  As we continue the search, a number of them even begin to focus on the least expensive locations in town.  It’s easy to see the process that happens in their minds.  They start out very excited because they have a dream of opening this great, successful retail operation right in the middle of where everyone is shopping.  Then, as time goes by, the “reality” of the costs of doing business sets in, and they start to focus on the worst case scenario.  They end up asking themselves “what happens if this doesn’t work?”, and they look to save on every expense including rent.

Unfortunately, that is often a recipe for failure.  It is well understood that foot traffic and drive-by traffic are integral to the success of the vast majority of retail businesses.  That’s why drug store chains like to locate in shopping centers where large grocery store chains are.  Other retailers are then attracted to the traffic that those two uses will bring into a center, and on and on it goes. 

I’ve seen retailers ultimately elect to rent spaces that nobody can even see in order to save money.  For instance, I saw one business locate in the basement of a regional shopping mall.  The only things down there were their location and the mall management office.  For some reason, they thought that people would find them because they were in a prevalent regional mall.  The problem was that nobody knew they were there, and they did no business.  That’s an extreme example.  However, the point is that every tenant needs to strike a balance between occupancy costs and visibility/traffic.  It is an extreme rarity that a retail business does well in a location that people can’t see when they drive by, or that they can’t readily figure out how to get to.

Our job as brokers is to get them to balance their fear of failure with their sense of positive expectations of success.  The right space gets them exposure to a large number of the right customers for the least cost possible.  Once you start looking below that line, you are losing valuable customers and hence are really diminishing the probability of success.

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About marylandcommercialleaseadvisor

I am a veteran negotiator that has done hundreds of retail, office and industrial leases throughout the United States. I have been a licensed Maryland attorney since 1985, and a licensed commercial real estate broker dating back to 1991. I have served as an expert witness in commercial real estate matters on multiple occasions, and have been a national instructor on real estate leasing issues, retail investments, and distressed commercial assets and REO's. From 1995-2004, I served as the head leasing attorney for the eastern United States for Glenborough Realty Trust, a $2.5 billion diversified REIT that was traded on the New York Stock Exchange. I offer a full spectrum of expert leasing services to landlords and tenants of all types. I am well trained in site location, and I can find the perfect location for a tenant. I can negotiate the business terms with the best of them, PLUS I am an accomplished leasing attorney that has negotiated against many of the best leasing attorneys in the nation. I have negotiated leases for/with companies such as Lord and Taylor, Circuit City, Starbuck's, Outback Steakhouse, Hometown Buffet, Popeye's, Chipotle, U.S. First National Credit Union, Merrill Lynch, New York Life, Bella Photography, Parsons-Brinckerhoff, Caterpillar, Fed Ex, Clear Channel Communications, and many other noted national and regional companies. I have also worked with scores of local regional tenants. I have also developed and leased out a shopping center, and have been a commercial tenant upon at least three occasions myself. I also spent four years as a commercial construction and permanent lender for a large bank. So, I understand real estate leasing from virtually all sides of the deal. That enables me to negotiate win-win deals for clients of all types. I am available as a broker, attorney, and/or consultant to landlords and tenants alike.
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