Why Location Matters to Commercial Real Estate

We’ve all heard the mantra about buying a home: location, location, location. But does it apply to commercial real estate location as well? Here are the most important considerations when purchasing commercial property.

Is Location in Commercial Real Estate Important?

For most businesses, location is vitally important and can be the difference between success and failure. A new restaurant, for example, needs a visible location with accessibility and hungry clients. But for other businesses, location needs may be different. Service businesses such as plumbers, roofers, or call centers don’t need a prime location. For these businesses, a low-cost rental in a safe neighborhood may be advantageous. Either way, finding the right location is an important ingredient for success.

Targeting the Right Audience for Your Business 

Finding the right location for your business means finding the right combination of location and affordability. If you are a new business, the budget may be tight. But an inexpensive location in the wrong neighborhood may be a big mistake. There are many issues to consider when choosing a location, but these questions will give you a good start. Before you commit to a commercial lease or purchase, consider:

• How much rent can you afford?
• Is the proposed location zoned for your business activity? 
• What type of location is best for your business? Is foot traffic important?
• If customers are typically driving, is there parking nearby?
• Will the reputation of the building or neighborhood help draw customers?

Choosing the Right Location for Your Business

Different types of businesses attract business in different ways. A restaurant may be dependent on automobile traffic and a location in an upscale neighborhood, while a coffee shop or lunch diner may depend on foot traffic from offices nearby. Clothing stores tend to do well near other similar shops while a pizza parlor might lose business to a similar business in the same center.

Look for a location that is drawing customers who would visit your business. The perfect location for your business depends on the customers you want to attract and the other businesses in the area nearby.

Is the Proposed Location Appropriate for Your Business?

Another important consideration when choosing a business location is the current condition of the facilities and whether It is adaptable for your business. It must have the required plumbing, electric, and data services that you will need. In most cases it is very costly to upgrade these services on your own, so make sure that essential services are available and up to code for your use. 

Rising or Falling Property Values

When choosing a location for your business, you are committing to a long-term lease or purchase, so it pays to make sure the neighborhood trends are in your favor. A neighborhood that is falling into disrepair and has many vacancies may be a poor choice, despite a bargain price. Likewise, an area that is undergoing revitalization may be a bargain, even at a higher cost because of the long-term increase in popularity and use.

Will Your Business Do Well in the Available Commercial Space?

Spend the time to check the history of a proposed commercial property purchase or lease before committing and check out the neighborhood thoroughly. Determine whether your business will fit into the current business environment. 

• Is the neighborhood changing for the better or worse?
• Are there competing businesses nearby? Is this a problem?
• Is commercial property in the area in demand? Or are other similar properties available?
• Does the area draw potential customers? 
• What is required to be successful in the available commercial space?

Property Access Issues for Commercial Properties

Property access problems can also be a problem for business owners. Access problems can arise due to planned construction problems, lack of space, or traffic overcrowding. 

As this is written, businesses in some areas are experiencing access issues due to small clinics doing Covid-19 drive-thru testing. Cars lined up for testing are dominating the parking lots and nearby businesses are suffering. This type of issue may be unavoidable, but with good research most property access issues are discoverable before signing a lease. 

Ask about upcoming construction and observe traffic patterns in the area on busy days. Check with the city planning department or a knowledgeable real estate broker about access issues in the area. These are the most common access problems, but others sometimes arise:

• Turn lane in front of building is eliminated making it difficult for clients to get into parking lot
• Frontage road is closed for a long period of time due to construction or road work
• Lack of parking spaces or spaces being taken by other businesses 
• Mall properties requiring businesses to close when the mall closes

Environmental Issues

Many former industrial sites have been rezoned and redesigned to be used as mixed-use retail. These types of projects are profitable for the property owner and can result in good locations for businesses of all kinds. However, these types of locations can have environmental problems that can completely derail your business. 

Soil or groundwater contamination can resurface years later when the property has changed hands and the new owner has no knowledge of the property background. When buying a property or signing a long-term lease, it is wise to have an environmental assessment done to determine whether environmental contamination might be present. It is far better to learn of looming issues before you build your dream business on the site of a former landfill or toxic waste dump. A knowledgeable real estate broker can help you order and understand an environmental assessment. 

Location, Location, Location?

Location is important to your business. How important depends on the type of business you have, but location plays many roles in the success of your business. It is always wise to consult an expert, especially when signing a purchase contract or a long-term lease. Consult with a commercial real estate broker who has experience in these issues and knows the area well.

Chicago is a competitive market, but don’t be pressured into signing a lease or purchase agreement without all the facts. Our commercial real estate team at Millennium Properties is ready to help you find the ideal site that fulfils your business needs and sets you up for success.