Retail Location Strategies

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Retail Location Strategies
Learning the New Rules for Site Selection Will Keep You Ahead of the Game.

Nationwide, the retail sector enjoyed robust growth during the first half of the decade, due in great part to the continued expansion of big boxes. The excitement, however, is dying down, as several category-killer retailers experience slowing sales. The once-zealous players are becoming more cautious, and once again the rules of the game are changing for developers and commercial brokers.

New Development Drivers 
Traditionally, retail centers have been defined as either regional, community, or neighborhood, with standard tenants for each of these categories. Recently, though, the lines have blurred, as discount department stores anchor regional malls and traditional mall tenants move in-line at strip centers or into freestanding locations.

The three familiar categories have now polarized into either regional or neighborhood locations. Lackluster performance has caused the retreat or merger of a number of retail chains, both large and small. The theater and entertainment group, once shunned by many developers and anchor retailers, is fast becoming the darling of the industry. And in the wake of continuing retail bankruptcies and mergers, capital markets are taking a closer look at new development. In fact, many financial institutions have reallocated funds for property types, dropping retail from the most-favored status.

With fewer dollars focused on this overbuilt market-and cautious tenants becoming more selective in choosing new locations-developers and retailers must be more creative. As a result, new deals will rely less on the credit of the tenant and more on the developer's use and positioning of a site as it relates to the market.

Location, Location, Location? 
What does all of this mean if you have a site looking for a use or a use looking for a site? Throw out those preconceived ideas about location, as the old adage is in a state of evolution. Market, market, market is a more-appropriate concept for the future as retailers and developers alike ask not "Is this a good location," but rather "Is this the best location in the market, given the competition?"

Historically, the criteria for many retailers has included a location on Main and Main, with a minimum population within a specific radius, generally concentric rings of 1, 3, 5, or 10 miles. But providing demographics based on concentric rings and identifying the competition are no longer enough to sell a buyer on a location. Road systems, buyer preferences, and new venues of competition must now be considered, making use of the new technologically advanced systems that overlay mapping, demographics, and other data.

Consistency in consumer behavior also plays a part in the decision-making process, as cluster analysis, which identifies similar behavior patterns within similar demographic tracts, becomes prevalent. Psychographics-adding psychology, behavior, and lifestyles to demographic data-is also being utilized. For example, the shopping patterns in the Midwest are not the same as those in the New York City metropolitan area when parking, road access, and visibility are considered.

Providing information on the existing, proposed, and potential competition surrounding each site is critical when reviewing any location. Geodemographic systems have quickly become the choice among savvy market researchers, as the use of one or more of these systems has proved successful in selecting new store locations. Doing research and providing this information are now key to satisfying retailers and capital markets.

Retailers, developers, and brokers must push the envelope and look beyond the obvious to find creative options. For example, Tandy's Incredible Universe, the cutting edge of electronics retailing, includes in-store McDonald's in its 185,000-square-foot stores. Brand recognition has made Starbucks a household word, with locations in...
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