Home Month and Year April 2020 Commercial Retail: It’s All About Location

Commercial Retail: It’s All About Location

What factors determine the best location?


When it comes to starting a new business, expanding to or moving to a new location, the old adage is “location, location, location” – and this still rings true to this day. No matter what type of retail business or service provider you are, success will be dependent on finding a location where your customers can find you easily and conveniently, while also being able to grab the eye of new customers.

Several location types are available to retailers and service providers, from freestanding locations in neighbourhood or regional shopping centres, to enclosed shopping centres and malls. Trying to decide among locations can be intimidating for some businesses, but if you know what each location offers, you will be able to make an informed decision that can be fundamental to the success of your company.

Firstly, let’s look at freestanding locations, which are generally locations that are on commercial properties and feature a single standalone building and a parking lot for customers. These can be located right off busy highways or hidden away in neighbourhood locations, and are built in a variety of sizes, customized to the need of the business at time of construction.

Speaking about the pros for a retailer or service provider when it comes to choosing a freestanding location as the brick-and-mortar location for their business, John Shamey, associate partner of Cushman & Wakefield Edmonton had this to say, “Freestanding buildings are typically occupied by destination based retailers who tend to service larger trade areas than a conventional retailer. In theory, tenants will pursue freestanding buildings for several fundamental reasons, including the idea of having no restrictions on what products or services they can sell, preventing any competition on the property, and they generally offer customers convenient access from major roads.”

Shamey continues, “In most cases, standalone buildings often provide tenants with greater signage opportunities to help increase their visibility, as well as a dedicated parking pool for customer convenience. I believe this theory will transform over time as online sales continue to increase and as home delivery programs become more efficient and readily available to customers. However, there are disadvantages of freestanding buildings, including limited foot traffic and required ongoing marketing initiatives to attract customers.”

Indoor shopping centres or shopping malls also have their pros when it comes to choosing these locations for a retailer or service provider. Terry Napper, regional manager, Saskatchewan & Northern Alberta, Cushman Wakefield Asset Services provided his insight on the selection of indoor shopping centres. “Shopping centres have always been community gathering spaces that offer experiences and services beyond traditional retail. It’s the overall experience that drives interest from both retailers and consumers. Londonderry continues to make this a priority and it is a contributing factor to its success, along with providing shoppers a dynamic retail mix.”

Napper explains further, “When a retailer is part of a shopping centre, they receive additional support from a marketing perspective, which is hugely beneficial over a standalone location. Shopping centres also have an attentive audience, so the opportunity to get a brand in front of the consumer is high. Also, we believe that as consumers experience decision fatigue in the saturated online market, they will return to an offline shopping experience, which centres like Londonderry will be ready to provide.”

Shamey also weighs in when it comes to selecting a shopping mall as the brick and mortar location for a retailer or service provider. “Essentially, retailers choose enclosed shopping malls over neighborhood or regional shopping centres for the benefit of its strategic location, high foot traffic, parking facilities and amenities. Enclosed shopping malls provide a convenient one-stop-shop for customers that are seeking a variety of products and a pleasant shopping experience, which in turn significantly reduces advertising costs. The negative aspects of enclosed shopping centres are that they often have expensive rents and substantial marketing fund charges, in addition to high operating costs. Other challenges include fierce competition, seasonal foot traffic, and regulations and rules from mall management.”

With the pros and cons of the major locations in mind, the next question is, which types of retailers are going to thrive in such locations. Above, Shamey mentioned that freestanding locations are often going to attract the attention of retailers with larger trade areas than conventional retailers, which are often destination-based brand retailers. He also mentions the types of retailers and service providers that are attracted to neighbourhood or regional shopping centres and enclosed shopping malls.

“Grocery stores, liquor stores, gas stations, quick service restaurants and personal service oriented businesses including hair salons, nail salons, medical clinics and dental clinics are usually located in neighborhood shopping centres since convenience is a major aspect of their business. Unique retailers, general merchandise, electronic and fashion retailers generally achieve higher sales from the impulse buyers, which are normally seen in high traffic enclosed shopping malls.”

Some retail businesses often benefit the most from choosing an enclosed shopping mall, and Napper gives us the details as to why, saying, “Retailers that offer an experiential shopping atmosphere benefit the most from mall locations. For example, places that offer opportunities to get consultations on wardrobe choices, as well as try-on or test products and gear like beauty retailers or athletic-focused stores, do really well. This experiential shopping also applies to luxury retail and service-based shops such as hair and nail salons.”

One challenge currently facing shopping malls is the growing trend of competition from online retailers. Many people have switched to the convenience of using click-and-order online businesses over traditional stores for a variety of their purchases, from electronics, to clothing and even groceries and impulse items. This means that experiential shopping is more important than ever when trying to compete in an enclosed shopping mall.

Napper states. “Stores that tend to experience difficulty in this competitive environment are the ones where the difference between being in-store versus shopping online is minimal. Londonderry goes to great effort to attract experiential-focused retailers to the centre.”

Through his experience in commercial real estate, and watching changing trends in shopping malls, Shamey also points out the need for shopping malls to attract experience-based retailers. “In the past, shopping malls used to rely on big box department stores to attract customers, however it is becoming more and more apparent that this model is not feasible. Now, shopping malls owners are focused on targeting retailers that provide customers with fun, unique, interactive experiences that elevate the shopping experience, like an Apple store. The majority of mall shoppers is the millennial demographic, who have proved that most of their purchasers go to experience-related purchases.”

An example of this dynamic is also seen in West Edmonton Mall (WEM). According to the Canadian Shopping Centre Study 2019 by the Retail Council of Canada, WEM saw over 30 million people in foot traffic over the year, further showing the continued love for shopping malls. The Retail Council of Canada analysis noted, “Canadian shopping centre landlords are adding entertainment centres to existing properties to further drive traffic, recognizing the success of centres such as West Edmonton Mall.”

Choosing the right location for your business is a core building block to the success of your brand. Your choice comes down to what requirements your business needs to fulfill, and the type of experience you want to build for your customers.