Extending Your Real Estate Department Through a Local Broker

Real estate departments within retail and restaurant companies continue to get smaller and more efficient.  What is their secret to success with a smaller internal team?

Partnering with the right local brokerage company, of course.  In providing market knowledge and “boots on the ground,” the local brokerage company becomes an extension of the retailer’s in-house real estate department – their partner in the market.

When a real estate department is interviewing local brokers, the conversation always encompasses market knowledge: rent, land prices, real estate values, availability of sites, etc.  However, it would unfairly minimize the value of a good local broker if you were to believe that market knowledge consists of simply what is available and how much it costs.

Local brokers should be equipped with salient knowledge of the following characteristics:

• Traffic – the patterns, not just the numbers. What are the traffic generators?  Which side of the street directionally is the to-work side, and which is the route home?  The local broker should be able to provide hyper targeted recommendations, even down to which corner of the intersection is the right placement, for their clients.
• Boundaries – local boundaries are often unnatural and unknown to visitors. It is easy to identify natural boundaries (rivers, lakes, highways) on a map, but the unnatural ones can be elusive and unexpected and based on the local market’s history and growth over many, many years.
• Submarkets – neighborhoods on a municipal map are helpful, but the local broker understands where the individuals in a target geographic submarket actually shop. The shopping center in closest proximity may not be the answer.
• Exclusions – which shopping centers have existing tenants that exclude competitors (direct or perceived). Experienced local brokers know the properties and landlords within their market(s).  They provide specific recommendations that are already narrowed to the properties that are feasible.

When selecting a local real estate broker, the interview should go both ways.  The Director of Real Estate should be evaluating the broker’s market knowledge and experience to determine whether they are the right fit.  The broker should be asking questions to gain further insight into the business: what they sell, who they sell to, why they’re successful.  A local broker cannot assume that they know which other retailers are viewed as preferred co-tenants or competitors.  Only by truly understanding their clients’ business is a broker able to effectively represent them.

Take for instance an educational supplies retailer that enters a new market where they only intend to add 1-2 locations.  They are really attempting to reach two target customers:  teachers and students.  For the teachers, they need to be located in close proximity to a highway or main road so they have easy access.  For the students, they need to be near families who utilize their services.  Only a local broker understands the complexity of having these two target customers and where the best location for a single store in a market should be located.

The value a local broker provides is even more evident in a multi-store rollout where the potential for cannibalism is significant.  Local shopping and traffic patterns determine whether stores located only a mile apart cater to different populations – or whether four miles apart is still too close.  The local broker becomes a crucial partner in ensuring the success of the store portfolio.

For decades, I have had the opportunity to work as a local broker with a number of retail real estate companies.  For each client, we rely on the tools of research and technology to provide basic market data.  But they are just tools.  The biggest value we provide is when we apply those tools to our own market knowledge to create a highly targeted, localized real estate plan.