Published in Shopping Center Business, May 2001
Originally published in Shopping Center Business
Today, with many major malls and community shopping centers owned by insurance companies, pension funds, foundations, institutions and foreigners, the current real estate depression is causing a new kind of consternation. Up until recently, ownership meant increasing income, full occupancy, strong department stores, and rising values; a gold-platted investment.
Leveraged buyouts of department stores, in the later '80s; a major recession, significant overbuilding, the savings and loan disaster and consumer frugality, resulted in significant problems to the industry. These problems are reflected in lower occupancy, declining overage rentals, store failures, slower rent payments, vacant department stores, and most importantly, lower real estate values. Where have all those guarantees, foreign buyers and rosy computer-generated income projections gone?
Over the years of reviewing and selecting restaurant locations, it has became obvious that the industry needed a generalized set of guidelines regarding location selection. Thus, in 1992, my book entitled, Restaurant & Fast Food Site Selection, was published. Furthermore, my latest book entitled,The Restaurant Location Guidebook, published in 2007 amplifies the need for these guidelines. Interestingly, there is a feeling in many parts of the country that dining is a very personal thing, and therefore taste can overcome a secondary location.
Given the recessionary state of the economy and the current decline in both white-and blue-collar jobs, it might seem inappropriate to consider constructing a new facility or relocating an existing one. Nothing could be further from the truth. In fact, for companies primarily housed in office buildings, this is an excellent time since there is such an excess of office space that truly incredible deals can be negotiated. It is not unusual for large space users to negotiate very low long-term rentals with owner's of low occupancy new buildings. This can result in part ownership of a building or complex, along with numerous other concessions and considerations that several years ago were unheard of.
Have you ever heard someone say that. Are they still in business? Perhaps some are; however I would bet that more are not. It is hard for many in the pizza business to understand that locations are as important as the product, and in many cases, more important. Naturally, the product has to be acceptable, or you won't need a location. Nonetheless, without adequate locations, one is starting from a negative position. Most often, it is a short or long term death knell.