How to Choose the Best Location for Your Business
It's probably the most recognized 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 as much as one might think. 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 heavily 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 appeals to the customers you serve. It's wise to go where the customers are—or where your product or service is lacking. 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 be located near hospitals or other medical centers; attorneys tend to cluster near courthouses; and accountants are usually found in locations that cater to other professional businesses.
High Visibility vs. Low Key
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 types of companies, location doesn't matter as much, and 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.
Understanding Demographics
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 be more successful if they are close to employment centers where they can cater to the business crowd.
One major factor that is often overlooked at the outset is the distance from the 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. If that's you, balance the needs of your customers and employees—as well as your own personal needs—weigh locations according to how they serve the overall strategy for your business, and then make an informed location decision.
Co-tenancy
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 major purchase decision, they want to shop around to ensure 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.
Quality Wins
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. Many restaurants may be in marginal locations, for example, but still do an outstanding business. They understand the VOC (Voice of the Customer) better than their competition, and they consistently perform. In those cases, customers are willing travel a distance for a unique or favored experience. Those companies show it's possible to break the rules of what it usually takes to be a successful outpost, and still have a thriving business.
About the Author: Nick Banks
Nick Banks created Front Street Commercial Real Estate Group in 2002, offering expertise in developing and acquiring office and retail projects in Florida. He is involved in several commercial real estate industry organizations, including the International Council of Shopping Centers (ICSC), where he has been a frequent panelist. He was also the founding co-chair of the Gainesville committee for the North Florida chapter of Urban Land Institute.
