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Great Location Study: Competition

By: spaceselectors   June 18, 2019

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A great location has minimal competition.

There’s no getting around it. Commercial real estate is a highly competitive, rewarding yet grimy business. There are incessant waves of influence that make it difficult for commercial owners and tenants to stay ahead of the crowd. There’s nothing you can do to keep your competitors from entering the race. And while you and I are never say die types of people, fighting the good fight is exhausting! The type of ‘fight’ that we have to endure makes a difference too.

There are definitely times when healthy competition can drive traffic and strong revenues to a retail property. For example, I can think of several cities that have ‘design districts’. Design districts are areas typically comprised of a few city blocks where industry professionals and lay people can find interior design firms, architects, lighting stores, carpet warehouses and other venues that sell furniture and accessories. As you can imagine, on weekday evenings and weekends, these districts are inundated from hundreds of people that are looking to make home or office improvements. The tightly merchandised retail neighborhood shares in the benefit of a preponderance of complementary uses i.e. healthy competition.

Unfortunately, competition isn’t usually well-coordinated on the street, if at all. The main reason for this disparate and dog eat dog leasing approach is due to the multitude of disconnected ownership groups. If owner A has cool tenant A attracting lots of press and consistent foot traffic, owner B a few doors down the block with a similarly sized vacancy will lease space to copy-cat cool tenant B with hopes of generating the same buzz. The unoriginal plan may work for owner B. It may continue to work for owners C through J as well. But at some point, the music stops. The trend is dead, buildouts become too expensive or a dozen other things are introduced that make it impossible for owner A, the one with the pioneering idea, to keep her tenant successful.

Great locations have minimal opportunities for competition. Such locations can be created based upon the neighborhood they’re in or the iconic building they’re in, for example. Be patient and look for unique options that limit the amount of runners in the race.

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