how hard is a hard corner?
October 4, 2007 7:47 PM   Subscribe

How do I quantify "location, location, location?"

A entrepreneurial partner and I disagree as to whether a commercial space would succeed as a retail bakery. Specifically, the building owner has leased our desired hard corner to another venture and instead has offered the space two doors down in the same building.

We agree that the second spot has less foot traffic and less visibility, but of course the residential and workplace density, the median income, the shopping district, the zone, is the same. As an additional factor, the second spot has an adjacent pedestrian walkway to a parking lot, with park benches and planters.

We want to resolve our disagreement quantitatively. Is there a way to translate these factors to sales projections, or is it all gut feelings and guesswork?
posted by ioesf to Work & Money (9 answers total) 1 user marked this as a favorite
The term you're looking for is "frontage". What is the ratio of linear feet facing out to the public?

What you need to do is first calculate the value of each of the spaces if they did not face onto the street. This is called the "setback". Then, come up with a theoretical value for each spot if there was an extremely shallow (physically) business in each of the locations, like a news stand or a souvenir shop.

From there, it's simple math. You take the result of your calculations with a hefty grain of salt and negotiate accordingly.
posted by nedpwolf at 8:20 PM on October 4, 2007

You can also do research to discover the "turnover" rate for these spaces.
posted by Eringatang at 8:23 PM on October 4, 2007

so, nedpwolf, the (setback value/sq ft * actual sq ft) + (frontage value/linear ft * actual linear ft) = site value?

seems like a reasonable framework, but how does one determine the theoretical frontage value to know how heavily it weighs against the setback?
posted by ioesf at 8:43 PM on October 4, 2007

Yeah, you got it. The frontage value per square foot is guestimated at by taking the value of comparable property with frontage and subtracting the value of comparable property with the same square footage with no frontage and dividing by linear feet.
posted by nedpwolf at 8:50 PM on October 4, 2007

Err, that should say frontage value per linear foot.
posted by nedpwolf at 8:58 PM on October 4, 2007

Yes, this is what commercial appraisers are for. Consult one; the location of a business like this is no small matter.
posted by 517 at 9:05 PM on October 4, 2007

interesting. So all these other variables - pedestrian counts and so on - can be used to determine comparable property, but have no quantitative value in themselves... It's all about the market. And in looking at comparable properties, the higher the frontage value, the more important it is that we get that corner spot.
posted by ioesf at 9:08 PM on October 4, 2007

Bad approach. I'm with you on the corner spot. But I think there are somethings you cannot put a numerical value to. It's absurd. You haven't sold one biscuit and you're counting the seams in your pocket. My guess is business would be about the same and If you really got hotcakes , they should speak for themselves. Work hard, promote your business. Hackneyed industry jargon , commercial appraisers,and phony business equations be damned.
posted by Student of Man at 11:25 AM on October 5, 2007

Student of Man's opinion would sure put a lot of appraisers out of work if it were actually true...

You can quantify this value, just like an appraiser would. However, you may not have to actually hire a commercial appraiser. I'm thinking you probably already know an appraiser or can approach one through a friend; ask for their specific advice on this simple question ("how would you do this?") and you may get it for free.

The thing to remember is, while there are many ways to obtain an answer (you could read the appraisal institute textbook if you want), none of the methods is necessarily "right" all of the time and the best way to approach it is to lean on others' experience.
posted by Chris4d at 4:45 PM on October 5, 2007

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