Site Selection

Tim Hayes.

SGF, Supreme Grumble Framer
Aug 31, 2001
Site Selection: Art or Science?
March 10, 2005
By Dees Stribling

INDIANAPOLIS-Can retailers live by data alone, or does gut feeling have a place in the site selection process? Four retail experts—each from different segments of the business—took up that question during a panel discussion at the International Council of Shopping Centers Idea Exchange here on Wednesday, “Site Selection: Art or Science?”

It’s a complicated question, but the consensus of the panel was that site selection is both art and science. The trick for retailers is to know when to apply data, and when to listen to their gut feelings.

C. David Zoba, president and COO of Indianapolis-based Premier Properties, moderated the panel, which was held at a crowded ballroom at the downtown Indianapolis Marriott. Formerly a real estate executive with Galyan’s and the Limited, he kicked off the panel by noting the difference between a landlord’s and a tenant’s perception of time, when it comes to the site selection process. “Time is on the tenant’s side,” he said. “For the landlord, the meter is always ticking.”

John C. Melaniphy III, EVP of the Chicago-based Melaniphy & Associates Inc., a retail research and consulting firm, began the panelists’ discussion with a review of the mind-boggling array of data sources now available to retailers, most of which didn’t exist 20 or even 10 years ago. Some information is offered over the Internet at no charge, such as U.S. Census Bureau data, while other data is collected for specific retailers for specific site-selection purposes, such as demographic and psychographic studies, shopper and license plate counting, aerial and satellite photos, and much more. It all adds up to a mountain that needs sorting through.

“Around the mass of data, retailers have to prepare a site selection strategy,” Melaniphy said. “That strategy will determine where they’re going to have access to their customer base, to people who are going to spend money with them frequently.”

But, he stressed, site selection isn’t all about data. “The science of site selection is found in all the data and the new technologies for acquiring that data,” he noted. “But the art of site selection is interpreting that data in light of your goals as a retailer, and being able to forecast changes in the market that will affect you in the future.”

The other panelists agreed with that assessment, adding some twists of their own. “The collection and reviewing of data is definitely critical,” noted William S. French, principal/VP at Colliers International’s Indianapolis office, and a leading retail broker in the Indy market. “But there’s another part to the art of site selection, and that’s impressing the real estate committee that approves the deal. If you can’t master that part of the art, nothing’s going to happen. The key element in that is understanding the company, and knowing the 100 different things that might affect its store at any given site.”

As a broker, it’s poison to a deal not to understand the various factors in site selection. “You can’t say ‘I don’t know,’ ” French said. “You have to know. This is especially true where it concerns municipalities, which are putting more and more restrictions on retail projects. What will the city approve? You have to know in detail.

John Reller, SVP of real estate with Indianapolis-based Steak ’n Shake, a restaurant chain with about 430 units, brought a retailer’s perspective to the panel. “I’d like site selection to be a science,” he noted, “and examining all the variables in the process is certainly important—demographics, traffic, competition, parking, access, penetration of your stores in a market, specifics of the deals, and more. The tools for understanding a site are important. But ultimately the process is an art. What’s your gut feeling? What do you like about a site?”

Reller speaks from 16 years of experience in finding places for the quick-service Steak ’n Shake to grow, and sometimes things don’t go as demographics and other data might suggest. One of the chain’s Indianapolis sites, he noted, does relatively poorly, despite being in the city’s prime retail trade area; by contrast, another site in the Indy market, in a submarket better known for its industrial real estate, is a stellar performer. “We didn’t predict that,” he noted.

Mark Jenkins, SVP of retail development for Kite Realty, also noted that gut feelings, for an experienced retail developer, shouldn’t be underrated. “I believe in the art of site selection,” he said. “The science of it is very important, but more to confirm your instincts. Data can confirm for you what you already know is true.

For a retail developer, he added, it’s absolutely critical “to understand who you’re working for, and what their needs are, if it’s a retailer with standalone product. If you’re doing multiple-retail development, you have to understand high-growth areas, and areas with growing income. Those areas are going to generate traffic.”

© 2005 by GlobeStRETAIL. All rights reserved.
Very interesting.

As we write, I'm going throught he process of buying retail space in our little New England town of 10,000.

It's the first new commercial construction for many years. The town is very concerned about development and frequently votes to save land for conservation, rather than develop it.

But the town has allowed this lovely retail/business project. And two more similar projects have broken ground since. In the last 2 -3 years, 3 upscale restaurants have opened and are packed every time we're there. There's very little existing retail space, but a growing community. (New expanded, high tech high school) Residential construction continues at a brisk pace.

I've researched demographics, traffic patterns, yadda, yadda. Talked to my very expensive and VERY worth it accountant. He gave a thumbs up.

My hunches say it's a great deal. Even though the developer has been an absolute sleaze. Not signing things, not dating things, playing dumb.

My husband, (better known at town hall) has found out TONS about regulations and people. He's a stickler for details and has a constitution of steel. We've stayed on top of it.

Summary: Do the research, talk to people in the area of your purchase/lease. Then talk to partners, family, friends.
I don't think you have to be a professional retail developer to get the information you need to make an informed decision....just talk to people.

Oh, and did your Mama teach you to be a good judge of character?
I try and rely on the wisdom of those companies that have a)shown great success in site selection and b)have a mirrored demographic that I think will fit for me.

I think way too often we tend to look at prospective site selection from a "How much does it cost" attitude with an artificially low amount in mind.

The worst thing that happens is that the site is actually worth what you paid in base rent. If there was ever a truer adage then you get what you pay for, it is especially true in rent.

Too little rent offers too little in opportunity. Face it, if the site was worth more, bet the farm that the landlord knows it way before you do. And will charge accordingly

I often hear framers proudly proclaim how they got such great deals and how they received all these great throw-ins such as free rent and tenant allowances. In truth, great spaces don't need those perks to get quality tenants.

Best advice I ever give on site selection is to get better than you think. And look for those decisions to be made by people much smarter than you; those who have to make good decisions to keep their jobs

Now, these things are only important if you want your business to grow and flourish