Retail Lending “Rules”
In my previous blog post entitled Retail Real Estate Lending Rules. What’s Your Lender Looking For? We touched on some of the considerations a lender would be concerned with, which included:
- Tenant mix, “brand” recognition, and market dominance;
- Physical appearance of the retail centre, and
- Parking and loading facilities.
Your Lender’s Concerns
Let’s take a closer look at the physical attributes of a winning retail location. They are your lender’s concerns. They should be yours as well.
A successful retail location will attract and retain quality tenants. Much of what makes a retail location successful are the attributes of a site’s location.
Traffic Counts are important
- Is the property located on a busy thoroughfare, with high vehicle and pedestrian traffic? This cannot be overstated. Traffic equates to visits, which equates to potential purchasers. Traffic counts are often available from local municipalities. Pedestrian activity can be observed. Anecdotal information is often available from neighboring tenants and businesses.
- Does the centre have good exposure? This goes hand in hand with traffic counts. Not only do you need a high volume of traffic by your retail location, you need to have your location oriented in such a manner that pedestrians and vehicles can easily see you. This means a storefront ideally facing the roadway, and not perpendicular to it.
- Is there sufficient parking?
Access and Traffic Flows are as well
- Is the parking easy to access? Successful centres tend to be located at or adjacent to traffic signal controlled intersections, or benefit from having a dedicated “right-in and right-out” turning lane. If your customers cannot readily access your parking lot because of a roadway median, they may not be inclined to drive another block or two to find a place to make a U-turn. Consumers are often fickle, and impatient. Do not make their visit a difficult one. Traffic flows are of considerable importance.
Going My Way?
- Is the property located on the “going-home” side of the road? This may be important for those impulse shoppers who otherwise may not be inclined to stop. If its convenient, and little time is wasted by stopping, then consumers will likely do so. The inverse may be true however for another type of retailer (think coffee shop!) who want to capture the morning (i.e. “going-to-work”) crowd.
- Is the location a natural retailing area? More specifically, is the area conducive to your tenant’s type of retailing? A location in a University sector may be terrific for a coffee shop. It may not be particularly good for a high end furniture retailer.
- Is your property located on the “sunny side” of the street? Inclement weather or cold temperatures can make a serious dent in pedestrian traffic. But everyone enjoys walking on the sunny side of the street!
What’s Your Competition up to?
- Where is your competition located? Many retailers do well located close to their competitors. Shoe stores and Opticians come to mind. There are many others. However there may be reasons not to follow your competition. A recent post by Don Catalano in REOptimizer entitled Retail Site Selection Tips, raises some good observations.
It is unlikely that your retail location has all of these attributes. What is important is that you understand that these site characteristics define a successful retail location. Be prepared to confidently articulate to your lender how you will attract and retain quality retail tenants in your development.