Many of us have noticed the stretches of vacant storefronts and
other open commercial space in our communities. While these properties may
present an opportunity for deal-hungry investors, there’s no clearer sign
that we are in a tenant’s market.
In my work managing and leasing commercial property, I frequently emphasize
to investors the importance of providing outstanding service to existing
tenants to retain strong occupancy rates in their buildings. I entered this
industry in the mid-1990s as a property manager which, in my opinion, is the
greatest way to learn real estate because it gives you an in-depth
understanding of the needs of both the landlord and the tenant.
And today, tenants’ needs are at the forefront. Prior to renewing their
lease, many are taking the time to evaluate all the options available. Where
in the past tenants may have been content to look at comparable locations
within the immediate area, they now have no reservations about scouting
properties far and wide before committing to renew or terminate their
Attractive rents, deals and incentives such as $10 to $20 per-square-foot
improvement allowances have many thinking about calling in the movers. In
fact, given the state of the market, I would not be surprised to see
businesses relocate multiple times over the coming years as they jockey for
better financial footing.
While it’s no secret that there are deals to be had, chasing the cheapest
rent isn’t necessarily in a company’s best interest. If you are a business considering
relocating, I strongly urge you not to make your decision merely on the
economics of the lease.
So often, I have a new business that is not a fit for a certain location but
insists on pursuing the site solely based on the rent structure. They want to
know “where can I get the best deal?” The question they should be asking,
however, is “where can I make the most money?”
Rent is only one of many factors that can affect the success of your
business, and as a tenant you shouldn’t lose sight of the big picture. There
are many aspects to consider when determining the right location for your
• Business base. Study who your customers are and where they are located, and
position yourself accordingly. For instance, if you are opening a day care
center, you need to be sure the demographics of the towns around you have
plenty of children and young couples to support your business.
• Foot and vehicle traffic. Study the traffic patterns around your potential
location — are the streets and sidewalks full? Is there adequate and
convenient parking? There may be a reason you are getting a great deal on
• Visibility. For convenient retail concepts such as ice cream stores or
coffee shops, having an extremely visible location is of paramount
importance. Many retailers are taking advantage of this market to move up to
street-front sites and out lots on well-traveled byways where the visibility
• Co-tenants. Make sure you have strong neighboring businesses that can help
drive traffic to your location. For instance, a salon catering to women might
do well to locate next to a grocery store, as opposed to a tire shop. A good
landlord should also be interested in attracting a successful mix of tenants
that support one another.
Work with your broker to develop a checklist of due diligence points to
determine your needs and your potential for success at a location. Whether
you are an expanding branded name or an independent retailer, you should always
do your homework and consult with a real estate professional on the site
selection process before signing a lease.
• Theresa Schulz is managing broker of Schulz Properties Ltd. in Downers
Grove and Chair of the Mainstreet Organization of REALTORS® Commercial