Article

Chasing Your Considerations When Selecting a Retail Location

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In the past two issues of Prosperitas, I have talked to you about the crunch in the office market in Canada and specifically in Vancouver. For this issue we will change the scope and discuss retail real estate, or more specifically, issues that should be considered when selecting the location from which you deliver your product to your valuable customers and to attract new ones into the fold.

Summary
Asset Class
Retail
Location
Greater Vancouver
Date
October 1, 2006
Author
Klein Commercial
Services
Asset Advisory Services, Research Services

1. What can you afford to pay for retail lease rates?

This number should be related to your anticipated revenues, best case and worst case, which is included in your detailed business plan. Each business, scale and type, has an operating percentage for gross rent as a function of gross revenue. A good rule of thumb lies between 10% and 15% of your gross revenue. Anything over this amount and you may as well invest in the real estate, not the business.

Keep in mind that most business owners overestimate revenue and underestimate market penetration. Be reasonable in your calculations and not willing to overpay for busy locations.

2. Your Customers

Where do they live? What do they eat? What clothes do they wear? How much money do they make? Where do their kids go to school? What clubs are their parents a part of? What else can I get to know about my customers? In marketing these
factors make-up what is known as your customer demographic and psychographic profiles.

Companies spend serious time and resources tracking and tabulating their customers through surveys, focus groups and any other systems they can utilize. They attempt to learn as much as they can about the ever elusive “CONSUMER!!”

For you this may not be necessary. Perhaps just paying attention to the customers you currently have will do the trick. Ask them for their opinions, they may surprise you. If you are starting a new venture, hopefully in the course of your due diligence you have identified some characteristics about your potential customers. Do a bit more research on those that you have identified.

3. Traffic

Is your business a destination or a neighbourhood shop? Every retail business owner desires high levels of traffic, but what sort of traffic will benefit your business? For example, in Vancouver both Broadway and Mainland would be considered “high traffic”; however, the type of traffic is very different. Broadway has six lanes of traffic and is a main thoroughfare for commuters.

The most successful retail outlets have large signage that is visible from a great distance, such as Toys R’ Us and Chapters. Broadway also benefits from clusters of stores selling similar products such as outdoor activity stores surrounding the Mountain Equipment Co-op (tenant mixing).

Mainland is a one lane, one-way street in Yaletown. Yaletown is a densely populated area. Shoppers in the area comprise of local residents and the area workforce. Yaletown also sees those who make the trip to enjoy the restaurants and shops in the area. What type of traffic will benefit your business?

4. The Appeal

So let’s fast forward. You have found your ideal space. You can afford it, your current customers like it and your store is surrounded by the right kind of traffic. The next question is how are you going to attract new customers into your store? Do not underestimate the importance of your lighting, floor layout, colours, signage and frontage. In the cluttered retail world, it is probably in
your best interest to hire a retail designer. Many small business owners believe that a professional is a luxury and out of reach when cash flow is tight; however, the cost may be lower than you think and the return is fantastic.

The photos included in this issue are of work done by the professionals at reflectionsofyou.ca. I have worked with Karen and Lawrence and recommend them without hesitation.

Of course, the most important thing you must consider when deciding on retail space is the commercial REALTOR® you choose to work with. Your commercial
REALTOR® will provide you with accurate, timely information on the market areas you are considering and guide you through negotiations with potential landlords or sellers. Your commercial REALTOR® should also be able to recommend professionals who will increase the value of your business and provide a full service, one stop shop.

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