Real Estate Articles

How to Select a Retail Location

Written by Brent Pace for Gaebler Ventures

There are many different types of retail locations that you could choose to lease for your retail venture. Here is a quick run-down of the different types of retail centers and their attributes.

If you are looking for a retail location for your company you can be overwhelmed with opportunities.

In order to make a good decision you have to first understand the different types of retail centers that are out there, and who they typically cater to.

Strip Mall

A strip center, or strip mall, is a small retail center that has no anchor. Usually a strip center will be close to the street, or it will be set back with a common parking lot in front. Although these can occasionally have name-brand tenants (such as a Starbucks coffee shop), they typically have small one-off type shops including cafés, nail and hair salons, copy shops, and things of that nature. Leasing here can be a good value option as they often feature very cheap rent and good lease terms.

Neighborhood Center

This type of development is very similar to a strip mall except that it is typically anchored by a grocery store. This can be an important feature if you are relying on traffic of random passers-by to generate your business. A neighborhood center has a trade area that is as big as the trade area of the grocer. Before leasing in this type of center be sure to locate all of the grocery chains in the vicinity to see how big your trade area really is. Leasing in a neighborhood center can be especially valuable if you feel that the grocery chain is a complement to the retail service you are offering.

Community Center

Unlike the neighborhood center, the community center serves a larger trade area. While it may have a grocery store, a community center is likely to have a junior department store like a Ross, Mervyns, or maybe even a Bed Bath and Beyond. Community center's can draw traffic from the trade area of several neighborhood centers if the junior anchor has some pull. In the past these centers often had hardware stores in them, but these are slowly disappearing.

These centers typically have slightly more expensive rental terms than the neighborhood center and strip malls. Part of this is driven by the anchor tenant and the traffic they provide to the development.

Power Center

A power center is usually located along a major arterial or highway with very good access. You don't typically find these tucked away in neighborhoods. Power Centers add even more features than your typical community center. A power center may feature a movie theatre and other amenities to complement junior anchor stores.

Co-tenancy requirements are common among lessees of power center space. You will find more chain stores in these types of developments including Best Buy, Barnes and Noble, Old Navy, Dress Barn, Sports Authority, and more.

Part of the attraction to a power center is the size. These developments have the critical mass to really drive traffic to the location. The consequence is that the typical small tenant will likely pay a little more for the space.

Fortress Mall

These developments are large formal structures that can contain upwards of 100 stores. While in the past they were almost always "fortresses" with internal corridors, the new trend is for open-air malls. These malls will often contain as many as 5 anchor department stores such as Macy's, Nordstrom, Saks 5th Avenue, Dillards, Sears, and other major regional department stores.

Rent in these malls can vary widely depending on the anchors and how old the mall is. As with any retail space, be sure to request demographic, foot traffic, and sales information before getting too deep into lease negotiations.

Brent Pace is currently an MBA candidate at University of California at Berkeley. Originally from Salt Lake City, Brent's experience is in commercial real estate development and management. Brent will have tips for small business owners as they negotiate their real estate needs.

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