Mistakes In Leasing Retail Spaces

I frequently represent local 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 start to ask about secondary retail locations, and then they ultimately concentrate on those spaces exclusively. As we continue on, 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 get scared of 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 figure out how to get to.

Our job as brokers is to get them to balance their fear of failure with their sense of enterpeneurship. 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.