Finding Your Perfect Fit: Location Essentials for Single-Tenant Net Lease Tenants
Single-Tenant Net Lease (STNL) properties offer a unique investment opportunity for businesses seeking long-term stability and predictable expenses. However, for tenants, securing the right property location is crucial for maximizing success. Here's a breakdown of key factors to consider when choosing an STNL location:
Location, Location, Location (and Visibility):
This age-old adage rings true for STNL tenants. Depending on your business category, you might want to look at different criteria. For example, fast food restaurants may prioritize locations with high visibility from main roads and easy access for both vehicles and pedestrians. Ample parking is essential, especially for retail businesses. If you want to attract more customers from the streets, look for corners or properties with prominent signage opportunities to maximize exposure to potential customers.
Targeting the Right Audience:
Demographics are your friend. Don't just settle for a busy location; ensure the surrounding area aligns with your target market. Analyze population density, income levels, and spending habits. A high-end furniture store might struggle in a low-income neighborhood, while a fast-food restaurant could thrive in a high-traffic area with a mix of demographics. Don’t forget to look at the demographic trends, whether the area is growing, stable, or declining. It may help to give insite into structuring lease increases for the future.
Riding the Wave of a Strong Economy:
A healthy local economy translates to success for your business. Look for areas with low unemployment rates and a growing population. This indicates a strong demand for services and retail, boosting your customer base and ensuring long-term viability. Furthermore, you want to examine the economic diversification and economic drivers as they indicate a strong real estate market.
The Power of Traffic Generators:
Surround yourself with success! Being positioned near businesses that complement yours can create a symbiotic relationship, attracting a wider customer base. Imagine a coffee shop thriving next to a bookstore, or a fitness center benefiting from a neighboring health food store. Also, look for other traffic generators that may benefit your business. Perhaps it is adjacent to a highschool, college or hospital; or it may be next to a regionally dominant big-box tenant, or mall. Even hotels/motels should be considered as traffic generators, depending on your type of business.
Avoiding Oversaturation:
Market saturation happens when the volume of a product or service in a marketplace has been maximized. Market saturation can be a recipe for disaster. While a busy area is desirable, avoid locations with an overabundance of similar businesses. Unless you have a clear competitive edge, it's best to steer clear and find a niche where your brand can shine. A Void Analysis can significantly help you to define where in a submarket may be the best location for your business.
Planning for the Future:
Be aware of any planned developments or infrastructure projects in the area. These can either significantly improve or hinder your business's long-term prospects. A new highway interchange might bring a surge in customers, while a planned construction project could temporarily disrupt foot traffic, or expanding the street and adding a median can significantly impact ingress/egress issues whereby you may lose customers.
Beyond Location: The Lease Matters Too
Remember, the lease agreement is just as important as the location itself. Carefully review the terms to understand your responsibilities, especially regarding property expenses like maintenance and insurance. In STNL properties, these costs typically fall on the tenant's shoulders. Additionally, STNL tends to be long term leases so you really want to make sure you make the right decision.
By meticulously evaluating these location factors and lease terms, you can ensure your STNL property choice aligns perfectly with your business goals. The right location, coupled with a well-negotiated lease, paves the way for long-term success and a thriving business venture. If you have any real estate needs, feel free to reach out to us at 310-943-8530 or info@cbicommercial.com