Retail properties: What your customers will want to know

Stores may be free standing, found in strip centers, shopping centers or malls. Retailers differ in their preference but have a common concern about finding the right location for their business. A strip center is a single building that has been divided typically into 5 to 10 stores. The structure allows for reconfiguration of the individual store sizes. Stores are either inline or end caps. Stores located at each end of the center can have the advantage of sign exposure on two sides and the possibility of drive through service. Adding an anchor tenant and some more small stores creates a shopping center. Anchor stores are large in size (often a supermarket or department store) and do their own advertising drawing customers to their store and the other shops in the center. Historically anchor tenants pay less in rent and the smaller stores "gladly" pay higher rent to benefit from the anchor stores advertising. Moving up in size, a number of anchor stores, also known as big box retailers, may be clustered on a site without small stores; this is known as a power center. Several anchor stores and a large number of specialty shops defines a regional shopping center or mall. Commercial practitioners can lease any of these stores or sell the properties as investments. Buyers and tenants will be interested in the tenant mix. What are the businesses of the other stores in the center and surrounding area? Hint: when you list a store for lease, analyze the tenant mix to determine what type of business is missing from the area. Demographics provide statistical data usually in rings, 1-3-5 mile or 5-10-20 mile radiuses from the site. Population, median household income, number of single family homes (rooftops), number of apartment units and age breakdowns within the ring are used by retailers to determine if their business would be successful at that location. Traffic counts, the number of cars that pass the site each day and in cities pedestrian counts can also influence site selection decisions. Unique only to retail are percentage leases. These can be structured various ways. A percentage of the retail sales in lieu of rent or an agreed rent below market value plus a percentage of the retail sales, often over a cap, called a natural breakeven point. For example, the tenant's fixed rent may be $3 below market value but they also pay 2% of their retail sales over $1 million. Typically percentage leases are used for very large tenants. However, in some major regional or enclosed malls a percentage lease may be required of all tenants. When listing properties find out everything your customers will want to know. Today we see many articles telling us all retailers are going out of business! Sure some businesses are closing but in general this is an exaggeration. What is happening is a review by national retailers of their various stores sales activity. Those locations that are not being productive may be closed. But, at the same time many of the "national" retailers are also looking for and opening new locations. Some local business may be struggling and in some areas the vacancy rates in retail are up, but empty stores create lease opportunities for agents and brokers. Don't let the market "talk" affect you, get out there and make deals happen! Edward Smith, RECS, is the Long Island metro regional director of Coldwell Banker Commercial NRT, Eastport, N.Y.