Why is location so important?
Why is location such an important factor when it comes to real estate, and what does it really mean? And how does it affect decisions regarding retail, office and industrial real estate?In very general terms, the better the location, the more valuable the real estate, but it?s important to look at the elements of location analysis. Retail locationsThe main driver for retail site selection is customers ? where are they, can they see and get to the store? Volumes have been written about demographics and psychographics, and such studies can be very helpful in assisting a retailer on where to locate. The retailer also needs to carefully define its trade zone in order to attract the type of customers it seeks and to carve out a niche for itself.The key elements are:? Visibility: While one can think of several stores that customers will visit as a destination, most retailers still want their customers to see them without much difficulty. In the Manchester area, having frontage on South Willow Street or Interstate 93 is highly desirable. Signage is an important part of visibility, and retailers want signs as large as they can get, often larger than what zoning allows.? Accessibility: No matter how visible a store might be, people need to get to and from the location as easily as possible. As retail moved away from central business districts to the suburbs, proximity to a highway exit became critical. The development of Exit 10 in Hooksett demonstrates this (although the establishment of a TIF district also encouraged development here). Another good example is the development of the Mall of New Hampshire and South Willow Street. The intersection of an interstate highway and a main artery generates considerable development at the intersection and in all directions spreading out from it.? Density and growth: Where do people live, and is the area growing? Do the people who live there have the income to spend on the retailer?s products or services? Most national retailers have developed very careful and precise demographic requirements that must be met before they will even consider an area for a location.While many national retailers are located in New Hampshire, there are several that we may never see simply because we don?t have the demographic profiles they are looking for. This is especially true as you go north from the border towns and Manchester.The ability of southern New Hampshire to draw major national retailers in the future will depend a great deal on our population growth and makeup, and that will depend a lot on jobs. If the state gets older, and loses people, some of the high-end retailers may never come.? Concentration of similar retailers: Why do drug stores, hamburger joints and grocery stores all seem to locate across from one another? Why are there so many restaurants and bars in downtown Manchester? Why is South Willow Street, Route 28 in Salem and Daniel Webster Highway in Nashua so clogged with retail? The general idea is that it makes sense for retailers to locate where there are similar businesses, if not competitors, because the types of customers who shop those businesses go to that area, and brand loyalty is not as strong as it once was.? Parking and safety: Along with access and visibility, retailers need ample parking that is close to the store. A simple rule of thumb for retail is five parking spaces per 1,000 square feet of store space, meaning a 10,000-square-foot store needs 50 parking spaces. Also, if an area is not safe for customers or employees, it will not attract retail businesses. Office locationsThe main driver for office location is clients. Where are they, and can they easily get to the office? For many years, professional offices were located almost exclusively in central business districts, and there are many large legal, financial and accounting firms still located in downtown Manchester. They have established a ?brand,? and their clients know where they are. The various professional firms often interact with one another, sharing clients, and many civic and community associations are located downtown.The key elements are:? Access, image and safe parking: Parking is often the biggest issue for businesses thinking about locating in a downtown, since office users generally like to have five spaces per thousand, like retailers, and such parking opportunities don?t generally exist in those areas. There is a mentality among many people that they need to park basically in front of a building and just walk in. Perhaps if more people lived in downtown areas and walked or used public transportation to get to the office this would be less of an issue.? Where the employees live: Many employers want the office to be located where their employees (and management) can get to as easily as their clients.? Expansion capability: Moving costs time and money, and if there is an opportunity for expansion, that is a plus.? Amenities: This is one of the attractions of downtown Manchester, for instance, with restaurants, schools, government offices, courthouses, libraries, stores and cultural institutions nearby. In suburban office buildings, amenities like coffee and lunch shops and gyms can be found. Industrial locationsThe word ?industrial? conjures up images of huge, smoke-billowing, noisy factories, but they don?t really exist anymore in New Hampshire. Still, a good deal of industrial activity is taking place, from high-tech companies to packaging firms to large warehouse and distribution facilities.Where do these companies locate? In the Manchester area, the predominant industrial areas are near the airport and on East Industrial Park Drive.The key elements are:? Zoning: Industrial areas have historically been separated from residential and retail areas, primarily to segregate the noxious odors and noise long associated with industrial activities. While some loud activities still take place in some industrial areas, the biggest ?nuisance? might be the truck traffic connected with warehouse and distribution facilities.? Infrastructure: Industrial businesses generally need as much infrastructure as possible, and this includes water, sewer, natural gas and power. While not always the case, these services are generally available in industrial parks.? Access: Like all other businesses, industrial users need access to highways, and sometimes rail and airports. They want to locate in areas that are convenient for their employees, and want as many amenities nearby as possible.? Specialized needs: The lines between office and industrial are getting somewhat blurred with high-tech businesses. I?m working with a global company right now that needs roughly 10,000 square feet of fully air-conditioned high-image space, half of which will be office and the other half lab and engineering space.This sounds pretty much like office space, but they also need traditional industrial items including at least one loading dock and some warehouse and shipping areas on the same level as the office and lab space. The need for the loading dock means we will have to confine our search to industrial areas, which generally don?t offer the type of upscale space this company seeks.Dan Scanlon, JD, CCIM, is an advisor with Grubb & Ellis|Coldstream Real Estate Advisors Inc., Bedford. He can be reached at 603-206-9605 or firstname.lastname@example.org.