Choosing a business location can be exciting, yet daunting. The fact that you’ve grown to a point to need a physical location is a huge step in business growth. As you consider your options it’s important to know your business’ answers to these critical questions:
Do You Need to Be Visible?
Fully consider how you gain customers. Do you thrive on walk-ins or do your customers find you? Many service, technology, manufacturing, and wholesale companies don’t need a high traffic location. Know this before you start looking, so you don’t get distracted by the shiny, yet unnecessary, high traffic corner location.
What Demographics are Best for Your Business?
Who is the customer you’re trying to attract and do they exist in the market you’re in? These factors could be irrelevant if you have a statewide, national, or even global market exposure. On the other hand, if you’re a retailer, it’s vital that you pick the location your particular customers are located in.
Here are some of the organizations that will help you get the data:
1. Biblioteca Centro para Puerto Rico: It has specialized databases, guides and directories for fundraising, proposal development and knowledge about philanthropic trends
2. Instituto de Estadística de Puerto Rico: You can analyze the demographics, the sales of the industry in which you want to enter, study the region in which you want to work, have access to real numbers that will help you analyze the potential of your business, as well as reduce risk. The easiest way is by sending an email to firstname.lastname@example.org.
3. Census-American Fact Finder: It is the online self-service tool of the Census Bureau designed to search for a variety of population, economic, geographic and housing information. How do I find the data I need?
4. Google Trends: A free and cost-free access tool provided by Google, which allows you to compare the search popularity of several words or phrases.
5. Statista: A platform on current statistics on relevant topics, you will have direct access to more than one million data and trends from 170 industries in 50 countries.
What is Your Budget?
Know your financial situation, the market basics, and what you can afford before starting your search. Do you want to buy or lease your space? This plays heavily into your budget, how long you need the space, and what risk you’re willing to take. For most businesses just getting into a physical location, leasing usually makes the most sense. Don’t rule out a purchase though! If you think you’d like to consider both for a particular property, ask your realtor to run a lease versus buy analysis and help you determine the right path for your budget.
How to Search
Almost all commercial property is searchable online. Certainly start your search there, but don’t forget that realtors can be a great resource too. Realtors get paid on the listing or selling side, so take advantage of the free service to you when you’re property hunting for a business location.
Know Your Commercial Terms
Before you call up a realtor, it is helpful to become versed in the basic verbiage and commercial terms. This will help you know the right questions to ask and enable you to make better decisions. Here are some commercial terms you should know:
NNN (Triple Net) - Property for lease is often listed as a square footage number followed by the term Gross or NNN. It could also be N or NN. Let’s start with the term NNN. Triple Net means that the tenant (aka you) will pay all additional expenses of your proportionate share of the building. This may include taxes, insurance, utilities and common area maintenance or any combination thereof.
CAM - Common area maintenance is a bundle of monthly property expenses such as mowing, snow removal, common area utilities, small repairs, cleaning, etc. A portion of these expenses is often charged back to the tenant in a NNN lease.
Gross - A gross lease means that the rent amount will include all expenses. There can be varying degrees of NNN or Gross so be sure to ask what is included.
Whitebox or Vanilla Shell - If you are looking at space that is just being built and has no flooring or HVAC system yet, you may be seeing a vanilla shell. Often times this term is used to describe how the landlord will deliver the space to the tenant. This becomes important if a space isn’t built yet, because you need to know what it will cost in tenant improvements (HVAC, ceilings, paint, flooring, plumbing, etc.) and who will be taking on those costs.
$/SF vs. $/month - Property is often listed differently. Just remember if you see a $/square foot the amount is for the entire year. For example $10/sf on 1000 square feet is 10x1000=$10,000/yr. That monthly rate would be $10,000/12 = $833.
Personal Guaranty - You may be asked for a personal guaranty if you are signing a lease and your company isn’t worth much yet. Talk to your attorney or banker first. Some landlords will require it, so they can hold you personally accountable to the lease if your business fails. The bottom line is to know what you’re signing.
Finding a business location does require planning and research, so be sure to do your due diligence.