Commercial real estate (CRE) professionals often struggle with optimal site selection, despite it being one of the most important decisions for any CRE venture. There are so many factors to consider when choosing a location for a business that fielding your way through can feel impossible.
Thankfully, today we have access to powerful geographic information systems (GIS) mapping tools, which take a lot of the guesswork out of site selection, ensuring you’re headed for business success.
This guide will explore how AlphaMap can help CRE professionals navigate the site selection process and choose the best location for their next CRE project.
Why is Site Selection So Important in CRE?
Site selection is a key factor that can determine the success or failure of a CRE endeavor.
Whether you’re dealing with a retail site, an office block, or an industrial facility, choosing the right location is vital.
It defines how easily customers, employees, and suppliers can access the site.
For retail, a location with heavy foot traffic is ideal, while office spaces benefit from being in a desirable part of town, and industrial facilities need to be positioned to optimize logistics.
The right location also has direct financial implications.
A business in a good spot can see higher revenues from increased sales or rental rates, while a poor location choice can hurt profitability through low demand or high operational costs.
These choices not only impact the short-term finances but also the long-term sustainability of the business. A prime location can set a business up with a stable customer base and secure long-term leases. On the other hand, a less desirable site can lead to frequent tenant turnover and empty spaces.
It's also important to consider evolving market trends when selecting a site. The growth of e-commerce has changed what businesses are looking for in a retail location, just as the increase in remote work has shifted the demand for office spaces.
The pace of change in sectors like technology and logistics means that not only current market conditions, but also potential future shifts, must be factored into the decision-making process.
Site selection affects the initial investment in a property and its value over time, which means it has a big impact on the returns that investors will see.
A good location is often more attractive to investors and can appreciate in value more quickly than a less desirable one.
Choosing the right site is a fundamental decision in CRE that affects almost every aspect of a business's potential for success. It's a decision that requires careful consideration of not just the current market, but where the market is heading, particularly in fast-moving sectors.
How to Determine an Optimal Site Using KSDs
As you start your search for the perfect CRE location, it’s best to first list what's most important for your business. This way, when you come across a potential site, you can quickly assess whether it ticks all the necessary boxes.
We’ll explain in the next section how you can use AlphaMap to help you figure out whether the site you are looking at meets your needs.
iOptimize Realty coined the phrase ‘key site drivers’ (KSDs) to define the aspects of a site that are important, over and above merely price. When ranked according to importance, KSDs become valuable benchmarks helping you to pick a site that satisfies your business’ requirements.
Similar to the concept of key performance indicators (KPIs) in business, KSDs serve as a guiding light to the right location by making sure you achieve all your required objectives from your prospective site.
Some KSDs you might start with are:
- Price: Of course, you want it to fit your budget.
- Accessibility: Your location needs to be easy for customers and staff to get to.
- Foot traffic: Especially important for retail — you want a site where people are around.
- Visibility: Your business should be easy to find and see.
- Infrastructure: The site should have the right facilities to support your operations.
- Parking: Important for customers and employees.
- Proximity to other services: Think about amenities like cafes, gyms, or stores.
- Safety: A safe environment is important for everyone.
- Competition: Know who's nearby and whether that will help or hinder you.
- Target market: Identify whether your ideal customers live in the area.
Feel free to customise them according to what you are looking for, and the needs of the business. After you’ve spent time outlining your unique KSDs, give each one of them a weighting which shows which are the most important.
For instance, if you’re in manufacturing, you might prioritize loading docks and highway access over foot traffic and nearby services.
Now when faced with a list of 30+ property sites for your business, you have an easy method for crossing the unsuitable ones off the list.
Practical Example
You are a coffee shop owner looking to open in a new location. You have identified a few potential locations, but you need to decide which one is the best fit for your business.
You can use the following KSDs to evaluate each potential location:
- Target market: Is the location in an area with a high population density and a high percentage of people who drink coffee?
- Foot traffic: Does the location have enough foot traffic to support your business model? Is there adequate parking?
- Price/budget: Can you afford the rent or mortgage payments?
- Long-term goals: Is the location in an area that is growing and developing? Is there room for your business to expand in the future?
By carefully evaluating each potential location using these criteria, you can select the site that is the best fit for your coffee shop.
Site Selection Steps
When it comes to choosing the right site for your business, following a set of strategic steps can streamline the process and enhance your decision-making. Consider these steps a roadmap to finding a site that aligns with your specific needs:
1. Identify Business Key Site Drivers (KSDs)
Start with a firm grasp of your business's requirements by identifying your KSDs, and make sure these are in sync with your overarching business plan.
2. Conduct a Market Analysis with AlphaMap
Leverage AlphaMap's tools to conduct a thorough market analysis. Specifically, look at potential customer bases and location options while assessing trade areas, demographic data, and competitor presence.
3. Evaluate Sites Firsthand
Go beyond digital research by physically touring potential sites. Assess the properties in person to gain insights that can't be captured through reports and statistics alone.
4. Analyze and Negotiate
Dive deeper into the details with a property analysis to uncover each site's advantages and drawbacks. Engage in negotiations with property owners or developers, aiming for terms that match your business needs.
5. Execute Due Diligence
Carry out comprehensive due diligence to review all key factors, including legal compliance, environmental assessments, and property condition evaluations.
6. Complete the Transaction
Once you are satisfied that all criteria have been met, proceed with contract execution and close the deal confidently.
Remember, that while it’s easy to do a lot of this work yourself with the help of AlphaMap’s powerful GIS analytics, there’s no substitute for expert advice. Be sure to consult with a CRE broker who understands your property sector and locations well.
Site Selection Using AlphaMap
Let's say you are a women's clothing retailer and you want to expand into a new state. You have one brick and mortar location in New York, and a flourishing online store. How would you go about picking a new site in the new state?
Here are some ways AlphaMap can help you:
Analyzing Your Existing Site
Login to AlphaMap and find the location of your existing retail store in Map Explorer. Click on that location. On the left hand side of the screen, you’ll get access to:
Parcel Reports
- Property records
- Zoning information
Area Reports
- Radius rings trade area
- Drive time trade area
- Demographics
- Car traffic
Mobility Reports
- True trade area
- Location visits
- Area visits
- Rank
- Shopping center overview
Assuming this existing store location is working well for you, you’ll want to find a new location with similar demographics and stats.
Conduct a Void Analysis Using the TenantFinder™ Feature
Use AlphaMap’s TenantFinder™ feature to identify potential customer bases and assess the demand for a particular type of business in a specific location. Simply look at other businesses that are similar to yours. Identify some potential locations for your new store.
Analyze the Market in the New Area
Once you have identified a few potential locations for your new retail store, you need to analyze the market in each area to assess its suitability. AlphaMap can help you with this in several ways:
- Trade Area Analysis: This feature allows you to define a trade area around each potential location and then analyze a variety of data points within that area, such as population density, income levels, and spending habits. You can also use this tool to identify potential competitors and assess the level of market saturation in each area.
- Population & Demographics: This feature provides detailed demographic data for each potential location, including age, income, education, household size, and so much more. You can use this data to assess the potential customer base for your new store and identify areas that are a good fit for your services or product.
- Car Traffic & Mobility Data: The car traffic feature provides data on traffic patterns in each potential location. You can use this data to assess the accessibility of each location. Studying mobility patterns will help you identify areas with high levels of foot traffic.
Evaluate Sites Firsthand
When visiting potential locations, use AlphaMap's mobile app to access property data and insights while on site.
Analysis and Negotiation
Use AlphaMap's property analysis tools to evaluate the financial viability of each site. Generate professional reports to support negotiations with property owners or developers.
Best Practices for Site Selection
In addition to using AlphaMap's tools, there are a number of best practices that you should follow when selecting a site for your business:
- Consider the current market conditions and the future potential of the area. Look for areas that are growing and developing, and that have the potential to support your business in the long term.
- Consider the local competition in each area. Avoid areas that are saturated with similar businesses. Instead, look for areas where there is a demand for your type of business and where you can differentiate yourself from the competition.
- Practice your own due diligence by doing an in-person site visit. Evaluate the site's fit with the surrounding community and infrastructure. Look for factors such as traffic patterns, parking availability, and access to public transportation.
- Get the help of a professional CRE broker. A CRE broker can help you with all aspects of the site selection process, from identifying potential locations to negotiating lease terms.
Final Thoughts on Site Selection in CRE
Site selection can be a complex process. By harnessing the power of AlphaMap and following the best practices outlined in this guide, CRE professionals can transform site selection from a daunting challenge into a strategic advantage, propelling their businesses towards sustained growth and prosperity.
If you’d like to find out more about AlphaMap’s features, book a demo with our team, today!
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