Making the Move
Getting the most for your money in today's high-rent market
By Joanne F. Schell

According to "Retail Market Trends North America: Summer 2004," a report from nationwide commercial real estate firm Grubb & Ellis, retail leasing activity in local markets has increased by more than five percent in the past year--and this number is expected to rise in 2005.

What does this mean for the eyecare professional looking for new space? Higher rents. "There's not too much available right now, and the lease rents are a lot higher," says David Burroughs, a vice president at Grubb & Ellis. If you are considering expansion or a move, here's a look at how to get the most for your money.

DO YOUR HOMEWORK

Checking out commercial real estate sites online can help you narrow the field. Then, it's time to contact a broker. "Use a broker, because they can tell you things about the site that aren't openly marketed," says Dennis DeAndre, chairman of LoopNet, an online commercial real estate listing service. "They will also have specific knowledge of additional inventory that you may not have seen."

SITE SELECTION

"The typical location should be in a primary trade area--within half a mile of a regional mall, with traffic of more than 30,000 cars per day," explains Herky Pollock, executive vice president of CB Richard Ellis retail services in Pittsburgh, Pa.

Make sure that any signage you have can be easily seen from the road, grabbing the attention of people driving by. "High traffic will create more business and can justify a higher rent," Burroughs says.

EASY ACCESS

All of the drive-by traffic and signage you can muster will be of no use if people can't easily access your location. A median in the road, for example, that prohibits left-hand turns can deter visitors. Adequate parking spaces are also important.

Examine the surroundings of the property. Look for retailers and restaurants that will bring traffic to the area on a daily basis.

Another important point to ponder: Where are your patients coming from? "If you are moving into an area that is already served, you will only get patients by taking them from someone else," says Gary W. Ware, president of Practice Consultants, a Calif.-based service specializing in the sale of optical practices. "In this case, you want to be right near them--existing patients won't want to travel too far to make a change."

NUMBERS CRUNCH

There are a host of costs to consider when making a decision. "There are maintenance, insurance, and taxes for the building. You will also pay your own utilities and the cost of renovating the existing space to meet your needs," notes Burroughs. Be aware of hidden costs. "There might be an upcoming renovation project in the works--you'll have to pay your part of that improvement."

Also, watch for run overages, which lock you into a percentage of your gross sales as a lease payment. If your rent is $2,000, but six percent of your sales is a larger number, you have to pay the greater amount.

When budgeting for rent, Ken Hollis, CEO of Doctors Vision Center, a N.C.-based practice with 80 locations, follows a simple formula. "My rule of thumb is not to spend more than 10 percent of my gross," he says. With a really great space, however, he will make an exception.

Look to a broker for advice on lease negotiations. "Depending on where you are, there can be tight restrictions on signage tied to the landlord or the city," says Ware. "Signing a lease can be pretty scary because most people don't read them closely enough."

To Rent or To Own?

Since interest rates are so low, buying has become a popular option for retail outlets searching for a new space. But, in order to make purchasing a property a good investment, the conditions have to be perfect. "If there is a small, freestanding building available on the outskirts of a shopping center, this is the time to buy it," says David Burroughs, a vice president at Grubb & Ellis, a commercial real estate firm. But these buildings are extremely hard to find. New dispensaries should think twice before making a purchase, says Ken Hollis, CEO of Doctors Vision Center, a N.C.-based practice with 80 locations. "If I'm starting out, I want to lease because it is more flexible," he says. "I can get out. If I own the building, and things don't work out, I might need to dispose of the practice and the real estate as well. " "I prefer to see someone lease first," says Gary W. Ware, president of Practice Consultants, a Calif.-based company. "It's hard enough to manage your practice at first, and trying to manage the building, even if you are the only occupant, adds complexity." In fact, Ware suggests that if you want to invest in real estate, do it apart from your dispensary. "It's unlikely that where you want to practice is the best opportunity to invest in real estate."