Are you in charge of real estate for a retailer, restaurant, bank, or other business that needs to locate near your customers to operate? Are you a VP or even an SVP of real estate—or do you aspire to be one someday? If so, keep reading—I’m going to talk about some things that not only can have a big impact on your department, but also can make life much better for you and your company.
No one is more aware than you that retail real estate is a difficult business, requiring you to be part psychologist, part negotiator, part geographer, and part psychic. Consider this reality: No other type of real estate can fail because a store is on the wrong quadrant of an intersection. Congratulations are in order—getting to this point in your career required hard work and plenty of smarts. And if you are aspiring for this job, you already know of the hard work and smarts that will be necessary to get you where you want to go, and I wish you the best of luck.
Enough of the well wishes; now, here’s the bad news. The state of retail real estate is changing … fast! There is so much retail space that new developments are generally not being built. As a result, the best opportunities are in higher demand, so if you’re growing, you’re competing, and the competition to secure quality sites is fierce. And though the Internet has not killed bricks-and-mortar, it has made securing the right locations more important—and imperative—than ever.
What Hasn’t Changed About Retail Real Estate
You’ve likely heard the adage, “The more things change, the more they stay the same.” That holds true for retail real estate: Despite an evolving retail landscape, some truths of choosing the best locations remain constant. Likely, your retail real estate process involves the following elements:
- Spreadsheets containing critical data such as store locations and performance, real estate plans, and target opportunities.
- Map files filled with crucial intelligence, stored on people’s local hard drives; many people could benefit from this information but often don’t even know it exists.
- Retail reps who know what’s on the ground but don’t have a strong handle on how the market is working. They struggle with questions such as:
- How much will a store at this location cannibalize our existing stores?
- How much rent can we pay at this location?
- Should we place one store here or two stores elsewhere?
- Should we exercise this option or relocate?
- Should we renovate this store or spend the money elsewhere?
- Real estate research people have powerful analytical tools, but their data is bad. Competitors may be missing from the intelligence or shown in the wrong location. The reps know the truth, but their knowledge isn’t documented anywhere other than their brains. Even the largest retailers face this issue.
An Improved Approach
A number of retailers, both small and large, are implementing systems to improve and streamline how they handle the real estate process. Some built their own systems, and others have turned to TAS Unity. The results have been nothing short of awesome, particularly with our solution. Some examples of this success include:
- Real estate reps are seeing three times the productivity. One rep who used to vet 300 sites per year can now assess a thousand.
- Retailers are experiencing four times the improvement in deal approval rates at real estate committee meetings.
Results such as this occur for a number of reasons:
- Everyone has a chance to get their market intelligence into the system.
- Relevant business intelligence such as store sales, real estate strategy, customer locations, P&Ls, rent, lease terms, and so on, are available in the same system. The combination of market intelligence and business intelligence in one system makes both exponentially more valuable.
- Everyone is sharing the same data, so there is one version of the truth for the company. Reps, research experts, and every other employee at the company starts to see the world from a similar perspective—everyone focuses on the best sites early in the process.
- People have easy access to all the information necessary to make decisions, thus speeding up the real estate process.
- Inferior sites are easily and immediately eliminated, thus allowing reps to focus early on only the best sites.
- Customer data can be mapped in order to show where your customers come (and don’t come) from. Combined with demand for your products by neighborhood, this data lets real estate reps easily see golden opportunities in which demand is high and market share is low. (In the absence of customer data, cell phone-based data is a reasonable surrogate.) All of this determines sites that maximize sales, minimize cannibalization, show pockets of opportunity (including multiple viable locations), and show changes in the market that may prescribe a relocation.
- Giving your real estate reps access to an analog model can help them truly understand the nature of a particular opportunity, including what rent can be supported at a given location and if renovation will produce a sufficient ROI.
Implementing a collaborative site selection process via a market and business intelligence system can provide a positive impact on a retailer’s real estate selection efforts. Benefits include:
- Tripled productivity.
- A 4x deal approval rate in Real Estate Committee (REC).
- More first-choice sites are confirmed and are not lost to other retailers.
- Lower occupancy costs are realized—because you are finding a location first, you are not in competition for the site as often, which otherwise might drive up rents or lower TI.
- Early focus on only the best sites means that few deals die in review or REC, thus resulting in drastically lower dead-deal costs.
What is the biggest challenge you encounter in assessing retail real estate sites?