Tuesday, July 18, 2006

Note to regular readers

Sorry to my regular readers of Business Articles of Note, due to new network equipment being installed I will not get an issue out today but it will return tomorrow mid-afternoon. Sorry for the inconvenience.

Sunday, July 16, 2006

Finding the Right Retail Location Part 3

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.

Locally Owned:

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 today’s real estate market but there is still some out there.

Developer Owned:

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: that’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:

  1. 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.

  1. 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.

  1. 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?

  1. 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 doesn’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 doesn’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 doesn’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 don’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:

  1. What kind of response time can I expect if there is a problem with the building such as roof leaks?
  2. What kind of upgrades are you planning over the next year?
  3. 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 attorney’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 begins….

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.

Monday, July 03, 2006

Business Articles of Note

Shoe retailer Payless putting its best foot forward

Move is afoot to block industrial banksKeeping

Boomers on the job with a few concessions

Buyers zoom in as digital SLR prices fall

Spanish-Language Radio's Big Voice

Entrepreneurship education pushed

Broad Experience For a Tall Job: A Hipper CNBC

Working retirees favor flexibility over running the place

InfoSpace targets wireless delivery

Nokia tests retail waters with its flagship stores

Closure looms for N.J. casinos

Web site helps you keep track of goals

Switch between the new and old

Mexico's broadband boom compounds piracy

Internet Calling Pressures Bells to Lower Rates

A Search Engine That's Becoming an Inventor

L.A. Up to No. 16 in Business Costs

Finding the Right Retail Location Part 2

This is designed to give the new retail and/or on-line business the general idea of possible locations for a store. This is designed to give a brief overview but each situation and each area is different and you need to find the right spot for your business by researching your area.

Here are the basic types of locations with some advantages, disadvantages, and general comments:


OK, almost everyone has been to a mall at one time or another. Most have anywhere from 500,000 to 1.5 million square feet of retail stores. Until the last few years, most have been enclosed.


  • Lots of Foot Traffic
  • Major Retailers to Draw Customers in


  • May draw in the wrong type of Client for your store
  • High Rents
  • Your store may not be wanted

General Comments:

For most new retail stores, the mall is not the place to be. While it may be attractive because of the foot traffic, the cost of getting the foot traffic is most likely not worth it. In addition many large malls do not want local retailers because they don’t “draw enough” people. Usually the malls that welcome local retailers are the ones who are on their deathbeds or having other troubles.

Also, a fact that many people don’t know is that the smaller stores in the mall subsidize the rent for the department stores. Often stores such as Nordstrom’s and others pay very little or no rent which means that you make up for it. (The thought is that you benefit enough from the traffic they bring in for you to pay it).

The other thought to consider is that many malls are not as attractive for stores as they where even 10 years ago with fierce competition from lifestyle and other types of malls.

Power Centers:

Power centers are a smaller than mainline malls but bigger than strip centers. Usually they include one or more big box retailers such as Wal-Mart, Target, Home Depot, Lowe’s, or many others. They usually are not enclosed and all the retail stores all have outside entrances.


  • Main attract good foot traffic
  • Less expensive than Malls


  • Wrong type of traffic
  • Cost
  • Market may be wrong

General Comments:

While located in a power center will be less expensive than the mall, it could still be out of the price range of many new retailers. Also, you need to research and see if the power center has the right mix of retailers to draw customers into your store. If you’re an upper class store a Wal-Mart or a Super Saver Grocery Store is probably not the right type of neighbors to have.

Strip Centers:

Strip Centers are the next step down from a power center. They can be anywhere from a two or three stores up to 10 or many. Some will have a major grocery store in them but many will not.


  • Cost


  • May not have enough foot traffic

General Comments:

Like all the choices, you must make sure you do enough research to ensure that you are finding the right location for you. Who are the other tenants? Are they going to attract the right customer that will also shop in your store? What are the demographics of the shopping center and are they compatible with yours? Just because a place may be cheaper, make sure that you are not being penny wise and pound-foolish.

Lifestyle Centers:

Lifestyle centers are a relatively new creation in retailing in the last few years. They are opening air centers that are designed to give a more “Main Street” shopping experience. They are Hybrid centers coming out which are basically malls that are now taking their roofs off and others that are built with housing components.


  • Foot Traffic
  • More Smaller Stores


  • Once again many centers don’t want the local retailers
  • Cost

General Comments:

You would think with the “Main Street” feel that the developers of lifestyle centers are trying to create, you would think that they would be more open to smaller local retailers but once again many are unfriendly to them.

You do have the advantage of better foot traffic than most strip centers but you must weigh whether the cost is worth it for the customer you are trying to attract.

Sorry to sound like a broken record but research, research, research.

Factory Outlet Malls:

The Factory Outlet Centers usually include stores than represent different manufacturers, which can either be like a showroom, or a place to sell outdated and discontinued merchandise.


  • Foot Traffic
  • Cost


  • Foot Traffic
  • Store may not be wanted

General Comments:

While Factory Outlet Stores had a surge in popularity in the mid-90’s, they have quickly faded. The centers that seem to be doing well are the ones located primarily in tourist areas such as Park City, Utah; Lincoln City, Oregon and Las Vegas.

Once again you may run into the situation where the mall managers may not want your business in their center but for a different reason that most of the others. In some cases stores where told that because they where not owned by a manufacturer that they where not wanted in the center. However, with some selling you might overcome this obstacle.

As in the case of all locations, you will want to research to see how well the center your looking to locate in is doing. Like stated above, they seem to be dying in non-tourist oriented places. Once of the causes of the downfall is that some retailers have signed agreements with one of the big boxes that states they will not sell anything for a lower price than the big box has it.

Transit Oriented Development:

Transit Oriented Developments are centers located at a major transportation station: Light Rail, Commuter Rail, etc. They are designed for commuters and people living near the station in order to reduce car trips.


  • Located at a major transportation port
  • Good foot access
  • Nearby Residential


  • Cost

General Comments:

Transit Oriented Development (TOD) can take many shapes and forms. If they are being developed right, not only will you have the transit riders coming through the area you should also have a good selection of residential neighborhoods in the area in order to attract traffic during non-peak travel periods.

As I keep on saying, you need to do the proper research in order to insure that the center will attract the right type of customer to your store. Many different kinds of retailers can work in a TOD but each one is different.

Office/Warehouse Space:

This is the type of facility that you find in more industrial areas of the city. They usually have a small office/showroom facility in the front with warehouse space in the back with a large door.


  • Cost
  • Warehouse Space


  • Location
  • Foot Traffic

If a major part of your business is going to be online, you may want to consider this type of facility. It will give you more room to store your merchandise but still offer you room to have a showroom or displays in the front plus some office space.

This option is less expensive so if your are not depending on foot traffic, this could be an excellent alternative for your business.


I hope you found this to be helpful in your search to create your successful business. Next week I will go over what you should be looking for in mall management and some of the warning signs you should look for before you sign your lease.

John Dornoff
Dornoff Consulting Group