We’ve all heard it a million times. It’s probably the most recognized (and overused) saying in commercial real estate—location, location, location.
But does location really matter?
Yes—but not always. For some businesses location is critical. For others it doesn’t matter at all. The determining factors have to do with what business you are in, how you reach your customers and how you interact with your team of employees. Here are five points to consider.
Retail vs. Non-Retail
Retail businesses rely more on location than professional or non-retail businesses. However, there are considerations for both. If you have a retail business, it’s important to be in a location that is well suited for the customers you serve. You have to go where customers are or where they need your product or service. Professionals tend to choose locations differently, focusing mostly on convenience. Proximity to workforce is always a factor, and access to transportation arteries is important to some companies. There are also specific dynamics that impact professionals’ locations. Doctors want to locate near hospitals or other medical centers; attorneys tend to cluster near courthouses; and accountants are usually found in office submarkets that cater to other professional businesses.
High Visibility vs. Low Key
Picking the most visible location or leasing space in the busiest shopping center may not always be worth the cost. These locations usually command a premium for rent that might not be worth it for your business. Some businesses send employees out to visit customers and rarely conduct business in their own office. For these businesses, location doesn’t matter as much; they are better off saving money by renting a less expensive space and putting the savings toward research or marketing. High-end retailers, however, need to be in the best locations. Their success depends on the image they create, and a high visibility location is often a must for them.
Who is your typical or ideal customer? When do they shop at your store? Some businesses rely on the typical demographic measures of population, daily car traffic and household income. For others these factors might not be as important. For example, most people get their hair cut close to home on their way to, or from, work or on the weekend. Therefore, salons don’t care as much about daytime population or traffic count; they want to be close to residential areas. Another example is a restaurant that serves breakfast and lunch. Typically, they will do better if they are close to employment centers where they can cater to the business crowd.
Have you ever wondered why car dealerships are all clustered together? Or furniture stores? Or clothing stores? They all want to be near one another because when a consumer is making a buying decision they usually want to shop around to make sure they are getting the best deal. Shoe stores want to be near other soft-good retailers, and dry cleaners and liquor stores tend to do best in proximity to supermarkets because the shopping patterns of their customers are similar to the typical grocery customer. On the other hand, destination businesses, like wholesale grocers, don’t rely on their neighbors for success. Their trade areas are usually regional instead of local so proximity to highways and major roads is more important.
If your business has an outstanding product or service and if you consistently deliver excellent customer service, you can minimize the impact that location plays. I can think of several examples of restaurants that are in marginal locations but still do an outstanding business. They understand the VOC (Voice of the Customer) better than their competition and they consistently perform. I know of a clothing store that moved from a prime location in a regional mall to a boutique shopping center. Yet, customers travel from miles away because the shopping experience is so unique. They have broken all the rules of what it usually takes to be a successful retailer and their business is thriving.
Location is important, but as you can see there is no magic location that works for every business. The location that is best for your business really depends on a variety of factors. One major factor that is often overlooked is the distance from the decision maker or business owner’s home. The person making the location decision is definitely going to consider how far they have to drive to work every day. Take time to understand the needs of your customers and employees, as well as your own personal needs, and the overall strategy for your business and you’ll make an informed location decision.
Nick Banks is the managing director of Front Street Commercial Real Estate Group located in Gainesville, Florida. Front Street offers brokerage, management and mortgage banking services to its commercial real estate clients. Nick is a graduate of the University of Florida where he serves as an advisory board member to the Bergstrom Center for Real Estate Studies. www.FrontStreet.net