What constitutes a good location for a business?

Rising transportation costs, including fuel and the proposed e-tolling, traffic congestion and the need for ease of access are just some of the relevant factors which impact on selecting a suitable location for a business, says David Reid, investment sales broker for JHI Properties.

“The physical location of a business is extremely important, because critical to the success of any company is the ability to effectively reach its desired target market.  In turn, this involves supply and demand – whether this relates to products or services. Suppliers need to be able to supply with ease, and markets need to be accessible in order to meet demand.”

Reid says supply and demand are influenced by many factors, including awareness of the product or service on offer. “However, location has a major impact on all these, even to the extent whereby having good exposure or visibility to passing traffic provides an ideal marketing opportunity which can save on advertising costs. Being in an acceptable location close to suppliers and customers or clients, having ease of access to highways and key transport routes, close proximity to public transport - particularly for staff, good overall security and having sufficient secure parking, all play a significant role in the choice of location.”

He says depending on the type of business and its target market, comfort factors such as general aesthetics and quality of the building may be relevant. Furthermore, it may be advantageous to be situated close to destinations that have synergies or something in common with the business, for example businesses offering financial services tend to be within easy reach of each other, in well-known nodes. This depends on the business, and some businesses may prefer to be close to their competitors because of these nodal factors.  Consideration should also be given to whether competitors situated close by can be bypassed by customers, so ease of communication with target markets is an important factor.

“You may find banks for example in the same node, or retail businesses choosing to be in high traffic shopping centres,” says Reid. Restaurants and distribution centres are good examples of businesses which need to be in the right location.

“The immediate and long-term consequences of being situated in the wrong location for the business should be considered. This can result in customers reviewing their source of supply ie going elsewhere, staff may experience transport problems or there may be a lack of suitability on the part of the new location, resulting in low morale, and a danger that not all the factors that affect the feasibility of the business are taken care of.

“In the long run, if the business location proves over time to be a bad one, sound advice is to rather get out sooner than later – if you are an owner-occupier put the property on the market even if it means a loss and do what is right for the business and its long term sustainability. If you are renting you need to consider the length of the lease and what your options are for relocation. Some businesses prefer to rent rather than purchase as it affords them far greater flexibility should their business expand or if their requirements may change in the future.  A courier company, for example, may well prefer to rent space - a factor which gives them the flexibility in order to relocate if needed, in order to be in the right location,” says Reid.

He adds that if your business is situated in an area that has become run down owing to a lack of service delivery, you need to try and mitigate the problem. “If service delivery is poor, get together with other businesses in the area and be proactive in trying to find a solution. In rejuvenating a location, one may find a number of landlords in an area or precinct are willing to join forces and perhaps set aside some of their proceeds from rentals for rejuvenation.  Good examples of this are The Main Street precinct in Johannesburg and Braamfontein, while the successful pedestrianisation and rejuvenation of Cape Town’s central city is a further case in point,” concludes Reid.

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