Questions

What are the pluses and minuses of each location?

Which location would you recommend for Stephanie and why?

Your Sister's Closet

Stephanie Wilson must decide where to open a ready-to-wear store she's been contemplating for several years. Now in her late 30s, she's been working in municipal government ever since leaving college, where she majored in fine arts. She's divorced with two children (ages five and eight) and wants her own business, at least partly to be able to spend more time with them. She loves fashion, feels she has a flair for it, and has taken evening courses in fashion design and retail management. Recently an old arcade building in the downtown section of her mid-western city had been rehabilitated and had been turned into a new shopping center and was looking for locally based retailers to make this a great local shopping option. This news crystallized her resolve to move now. She's considering three locations.

The Downtown Arcade

The city's central business district has been ailing for some time. The arcade renovation is the first completed section of a master redevelopment plan for the 1 square mile that constitutes this area. The arcade was planned to be the cornerstone for helping to revitalize the area and now that it is complete, there does seem to be movement for renovating and restoring the area. The arcade has a new department store, and the surrounding redevelopment area already has a design center, and several office buildings operating. While completion of the entire master plan is expected to take another six years, the arcade is now open for business and beginning to draw some traffic.

Dating from 1912, the arcade building was once the center of downtown trade, but it had been vacant for 15 years. The renovation of the arcade includes a three-level shopping facility, low-rate garage with validated parking, and convention center complex. Forty shops are planned for the first (ground) floor, 28 more on the second, and a series of restaurants on the third.

The location Stephanie is considering is 900 feet square and situated near the main ground floor entrance. Rent is $20 per square foot per year, for an annual total of $18,000. If sales exceed $225,000, rent will be calculated at 8 percent of sales. She'll have to sign a three-year lease.

LoDo

The gentrified urban area of the city where Stephanie lives is nicknamed LoDo because of its location about two miles south of the downtown area. Today the neat, well-kept small apartment buildings and houses made a comfortable neighborhood. Many residents have done the rehabilitation work themselves and take great pride in their neighborhood.

About 30 small retailers are now in an area of LoDo that is along the busiest street. These retailers are largely located in homes that have been repurposed into space for businesses, along with 2 some of the older existing business buildings that were erected when the neighborhood was first build back between the two World Wars. Most of the retailers are restaurants with menu options that reflect the upscale residents. There are also five small women's clothing stores scattered along the 10 block long stretch which creates the core of this retail area.

The site available to Stephanie is on this main street on the ground floor of an old house. Its space is also about 900 square feet. Rent is $15,000 annually with no percentage of sales clause. The landlord knows Stephanie, but will still require a two-year lease. One thing that Stephanie knows about shopping in this area is that parking can be a bit difficult as it is almost all on-street parking only.

Appletree Mall

This suburban mall has been open for eight years. A successful regional center, it has three department stores and 100 smaller shops just off a major interstate highway about eight miles from downtown. Of its nine women's clothing retailers, three are in a price category considerably higher than what Stephanie has in mind.

Appletree has captured the retail business in the city's southwest quadrant, though growth in that sector has slowed in the past year. Nevertheless, mall sales are still running 12 percent ahead of the previous year. Stephanie learned of plans to develop a second shopping center east of town, which would be about the same size and character as Appletree Mall. But ground breaking is still 18 months away, and no renting agent has begun to enlist tenants.

The store available to Stephanie in Appletree is two doors from the local department store's location in the mall. At 1,200 square feet, it's 33% larger than the other two possibilities. It is a typical mall type location, long and narrow - 24 feet in front by 50 feet deep. Rent is $24 per square foot ($28,800 annually). In addition, on sales that exceed $411,500, rent is 8 percent of sales. There's an additional charge of 1 percent of sales to cover common-area maintenance and mall promotions. The mall's five-year lease includes an escape clause if sales don't reach $411,500 after two years.