Chapter 1010Site Selection

Dr. Pointer NotesDr. Pointer Notes

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Chapter Objectives

To thoroughly examine the types of locations available to a retailer: isolated store, unplanned business district, and planned shopping center

To note the decisions necessary in choosing a general retail location

To describe the concept of one-hundred percent location

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Chapter Objectives_2

To discuss several criteria for evaluating general retail locations and the specific sites within them

To contrast alternative terms of occupancy

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Overview

Step 1: investigate alternative trading areas (Chapter 9)

Step 2: type of location is desirable determine what

Step 3: select the general locationStep 4: evaluate alternative specific

store sitesChapter 10 discusses steps 2-4

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3 Types of Locations

IsolatedStore

PlannedShoppingCenter

UnplannedBusinessDistrict

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Isolated Site

• An isolated site is a freestanding retail outlet located on either a highway or a street. No adjacent retailers to share traffic

• In the past, the mass merchandisers were forced to use this type of site.

• Today, diverse retailers elect this site type—Krispy Kreme Donuts, Target, McDonald’s,

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Isolated Stores

Advantages* No competition* Low rental costs* Flexibility* Good for

convenience stores

* Better visibility* Adaptable

facilities* Easy parking

Disadvantages* Difficulty attracting

customers* Travel distance* Lack of variety for

customers* High advertising

expenses* No cost sharing* Restrictive zoning

laws

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Unplanned Business District

• Unplanned business district is a type of retail location where 2 or more stores are situated together (close proximity) in such a way that the total arrangement or mix of stores is not due to prior long-range planning.

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Unplanned Business Districts

Central BusinessDistrict

SecondaryBusinessDistrict

NeighborhoodBusinessDistrict

StringDistrict

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Secondary Business Districts

• SBD is an unplanned shopping area in a city or town that is usually bounded by the interception of 2 major streets.

• Usually the same type of goods and services are sold as in the central business district

• Major strengths is good product selection and access to major thoroughfares and public transportation.

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Neighborhood Business Districts

• NBD is an unplanned shopping area that appeals to the convenience shopping and service needs of a single residential area

• Usually has several small stores, dry cleaner, stationery store, a barbershop/beauty salon, liquor store, and restaurant.

• Advantages are good location, store hours, parking less hectic atmosphere.

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String Shopping Area

• A string is an unplanned shopping area comprising a group of retail stores, often with similar or compatible product lines located along a major street

• example – group of auto dealers located side by side

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Central Business District

• A central business district (CBD) is the hub of retailing in a city, same as downtown.

• Greatest density of office building and no more than a 1 sq mile, with cultural and entertainment facilities surrounding it.

• Reasons for popularity- good product assortment, access to transportation, variety of customers and stores.

• Weaknesses – poor parking, traffic and delivery congestion, relatively poor image, high rent and taxes for most popular cites.

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The Planned Shopping Center

• A planned shopping center consists of a group of architecturally unified commercial establishments on a site which is centrally owned and managed. Galleria, Memorial City Mall, Willowbrook Mall

• Uses concept of balanced tenancy – stores complement each other as to quality and variety of product offerings-

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Planned Shopping Centers

Advantages* Well-rounded

assortments* Strong suburban

population* One-stop, family

shopping* Cost sharing* Transportation access* Pedestrian traffic

Disadvantages* Limited flexibility* Higher rent* Restrictions on offerings* Competitive environment* Requirements for

association memberships

* Too many malls* Domination by anchor

stores

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Types of Planned Shopping Centers

• Regional shopping Center- mega malls – Mall of American in Minnesota

• Community Shopping Center including a power center –is shopping center with up to 6 –12 category killers and mix of smaller stores most are complementary stores lifestyle centers open air shopping center with a upscale specialty stores,

• Neighborhood Shopping Center

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How Important are Planned Shopping Centers

• 46,000 U.S. Shopping Centers• 1200 are fully enclosed• Shopping center revenues exceed $1.2

trillion annually • Employee 11 million people• 94% of Americans over 18 yrs of age visit

average of once a month• Many older shopping centers are being

renovated, expanded or repositioned

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Renovations to Sustain Growth

The Florida Mall, Orlando, FloridaKing of Prussia, PennsylvaniaPark Place, Tucson, ArizonaRoosevelt Field, Long Island, New YorkUniversity Towne Center, San Diego,

California

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Table 10.1 A Characteristics of Centers

Features Regional CenterTotal site area 30-100+

Total sq. ft. leased 400,001-2,000,000+

Principal tenant 1, 2 or more departmentstores

Number of stores 50-100

Minimum # of people intrading area

100,000+

Driving time of tradingarea

Up to 30 minutes

Location Outside central city onhighway

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Table 10.1 B Characteristics of Centers

Features Community CenterTotal site area 10-30

Total sq. ft. leased 100,000-400,000

Principal tenant Branch department store

Number of stores 15-25

Minimum # of people intrading area

20,000-100,000

Driving time of tradingarea

Up to 20 minutes

Location Close to residentialareas

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Table 10.1 C Characteristics of Centers

Features NeighborhoodCenter

Total site area 3-10

Total sq. ft. leased 30,000-100,000

Principal tenant Supermarket ordrugstore

Number of stores 5-15

Minimum # of people intrading area

3,000-50,000

Driving time of tradingarea

Less than 15 minutes

Location Along majorthoroughfare in singleresidential areas

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Location and Site Evaluation

One-hundred Percent Location

The optimum site

for a particular store

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Location and Site Evaluation

• One –hundred percent locations – optimum site for the particular store type

• The requirements for a one hundred percent location will vary by retail type

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Location Evaluation Checklist

• Pedestrian Traffic- number and type of people

• Vehicular traffic- number &type of vehicles, congestion level

• Parking Facilities• Transportation

• Store composition• Specific Site• Terms of Occupancy• Overall rating

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Pedestrian Traffic

The most crucial measures of a location’s and site’s value are the number and type of people passing by.

Proper pedestrian traffic count should include* age and gender (exclude very young children)* count by time of day* pedestrian interviews* spot analysis of shopping trips

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Vehicular Traffic

• Important for – convenience stores– outlets in regional shopping centers– car washes– suburban areas with limited pedestrian

traffic

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Parking Considerations

Number and quality of spotsDistance of spots from storesAvailability of employee parkingPrice to charge customers for parking

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How Many Parking Spaces?

• Shopping centers = 4-5 spaces per 1000 square feet of gross floor space

• Supermarkets = 10-15 spaces per 1000 square feet of gross floor space

• Furniture stores = 3-4 spaces per 1000 square feet of gross floor space

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Terms of Occupancy Considerations

• Ownership versus Leasing- with adequate funding ownership could be good option,

• Type of Lease• Operations and Maintenance Costs• Taxes• Zoning Restrictions• Voluntary regulations

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Advantages of Ownership

• Lease renewal is not an issue• Monthly mortgage rate is stable• Operations are flexible• May be able to take advantage of site

appreciation

• Other ownership issues – construct new facility or renovate existing property

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Disadvantage of Ownership

• Might require more upfront capital• Long term commitment• Inability to readily change sites

Most facilities are leased Leasing minimizes initial investment, reduces

risk, reduces long term commitment and allows access to prime site and occupancy time may be immediate.

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Types of Leases

PercentageLease

Straight Lease

Maintenance-increase

recoupmentlease

GraduatedLease

Net Lease

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Types of Leases

• Straight lease – retailer pays a fixed amount per month over life of lease

• Percentage Lease – rent is related to sales or profits

• Graduated lease – precise increase in amount over a stated period of time

• Maintenance-increase-recoupement lease – has a provision allowing rent to increase if property owners expenses increases

• Net lease – Calls for all maintenance costs such as lighting, heating, insurance etc be paid by retailer

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Other Considerations

• Need to calculate the total costs of operating and maintenance for a site.

• Differences in sales taxes by locations could be a factor

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Questions

Please read chapter