02nd Nov 2007
The renter’s dilemma - low price/poor location or high price/great location?
I talked the other day with a new grad who was struggling to figure out where to locate his practice. He is in a large city in the Midwest, and he was looking at two locations:
1. One location is on a side street off the “main drag” but still within the area he wanted. It has limited visibility from the street. The rent is about $15 a square foot.
2. The second location is in a highly visible area in the area of a major retail mall. The office has a large sign on the street, of which he would have a small section. The rent is over $25 a square foot, including CAM (common area maintenance).
In addition, the first office is 1200 square feet, while the second office is 1700 square feet. He and his wife will be working together, so he figured the 1700 square feet would be good.
To figure the monthly rent: Multiply the price per square foot by the number of square feet to get the annual rent, then divide by 12. So monthly rent on the first office would be $1500 a month, while the rent on the second would be $3541.
So which would be best for this new DC? Consider the cost of advertising at the first location, since it’s not so easily visible. Marketers tell us there is a trade-off between rent and advertising, and this is a classic case of this situation.
Which office should this new DC rent? Reply by commenting. Sure, I have an opinion, but that’s all it is. I would like to hear from you.
I am a student at NYCC. This is a big dilemma for sure. I feel that I would try everything that i can to get enough financial resources to afford the 2nd (better, and more expensive) location. It’s important to look at it from a long term perspective. Business people always say “location location location” when it comes to the value of their business, and they must be saying this for a reason!
Another good reason for them to get the 2nd place is that since there will be 2 of them working together, the extra space is needed. When considering an office, we should keep the future expansion in mind.
That’s what I think about this situation…
Thanks
Kevin
I like your thoughts about the long-term perspective. If you can hang on with the higher rent for a while, you will be in place to capitalize on this excellent location over the years, and to save on advertising if you can use the location to develop a patient base faster.