Wow! Talk about a tough market to get into.
Opening retail operations in these economic conditions is a 50/50 proposition. The unsteadiness of the economy has many people worried but you have to hedge your bets against some very opportunistic lease rates. Still, the rent costs should be a very small percentage of your budget and certainly not the decision maker into whether or not to open new store.
Finding the ideal space in the ideal location
I will let individual business owners make thier own decsions about the economy, but there is a plethora of retail space available all over Knoxville.
Almost every center from Strawberry Plains to Turkey Creek has some type of space available. Some property owners are in more dire situations than others. A older center may not have the debt service of new construction so the owners may not be as motivated to deal. But some centers that were once asking $28.00 per square foot in popular location are down below $20.00. Those are pretty serious concession.
Even if you are getting a “deal” there are many details to consider before choosing a location.
1. Of course, Location, Location, Location: Walk in traffic is the best way for a new retailer to be discovered. Spend time in the neighborhood, learn the flow of traffic, the demographic, etc.
2. Type of space: What side of the street is the space on? Do you get afternoon sunlight? Is the space deep and dark? Is there a lot of wasted square footage in the space? Notice as much as you can on the first tour and make sure to come back several times at different times of day.
3. Neighbors/competitors: What businesses are located in the area? Will their customers see value in your merchandise or service? Ask other merchants about the pros and cons of the area.
4. Crime: Being in a neighborhood that is gentrifying or potentially has some crime issues can be acceptable for an office, but potentially disastrous for a retail outlet. Your most valuable asset is your inventory and although insurance will help make up for losses, it is a major distraction from your business. Do a little research and see how many police reports have been filed within a mile of your potential location.
5. Parking: How far away are the nearest parking areas? Do your customers need parking or will most of them be walking to your location? The ability to have your customers park close by and affordably is extremely important.
6. Signage: How big of a sign do you need to attract attention? What are the regulations of the landlord or the city as it relates to signage? Make sure to check out the neighbors and ask them how they got through the system if the regulations limit what you are hoping to do.
7. Foot traffic: How busy is the street during the daytime? How busy is the street during evening hours? What types of people seem to be walking around? Is their a bus stop or school nearby. Take note of who walks by and what percentage of people seem to be window shopping because the more people looking the higher likelihood you’ll find a new customer.
8. Brokers: Most shopping centers will have a broker to negotiate the deal…you should too. They are experts in finding you the proper space, picking out the details and getting you the lease you need.
Potential hidden cost: NNN Pass thrus. We have discussed these before. Shopping centers are not trying to hide these numbers from potential tenants but they are calculated differently than rent. They are CAM (common area maintenance), taxes and insurance; also know as pass-throughs or NNN charges. They are different at every center. Some NNN charges are as low as $2.50psf in older centers or neighborhoods. NNN charges in lifestyle centers such as Turkey Creek can be between $5 and $8 per square foot! In many cases these charges are passed through directly from the property owner to the tenant without mark up. But they can still add a considerable amount to your monthly rent check so pay attention to these.
Basically, if the time isn’t right don’t force the issue. Find a good broker who is experienced in the field to guide you along and make the decsion when all the pieces fit properly.
Cushman & Wakefield|Cornerstone CRES manages and leases more than 400,000sft of retail space in the Knoxville market. If we can be of assistance please let me know so you business has the proper headstart.
www.cornerstonecres.com // 865-617-2989 // jcazana@cornerstonecres.com
Justin Cazana, CCIM
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