By Jeff Hersh
Congratulations! You are finally ready to open your own studio, but it’s a new experience for you and you do not know how to get started.
Selecting the right real estate is critical to the success of your business and you may ask yourself “How will I know if it’s the right space?” The process of finding and securing space can be a long and daunting task and, in Part I of the Real Estate 101, we will explore to the key issues related to Location and the Space:
There are many attributes that can make a location attractive. Here are the 4 main factors to consider.
Accessibility is the most important attribute. No matter what program you may offer or who your clientele may be, your studio must be located in an area that is easy to get to. In an urban environment, this means being close to public transportation: Subways, buses, and light rail systems. In a suburban environment, highways and main roads combined with sufficient parking.
Next you need to consider the surrounding tenant mix. Are the neighboring businesses competitors, complimentary or neutral? You must be mindful, not fearful, of your competition and assess your competitive risk carefully before entering the market. Complementary and neutral businesses are great neighbors because they increase foot traffic in the area and can help drive customers to your space.
You can be successful in any market. The key is knowing which market you are in, positioning yourself correctly and adjusting your operating hours accordingly. Is this a Business district, residential or a mix of both? Business Districts are busy from Monday – Friday 8am to 6pm. Residential Districts are busiest after 6pm and on weekends. Another factor to consider, is saturation. Is the market just starting to trend and on its way to the next hottest neighborhood ? Is it already the hottest neighborhood ?
The key take away is not necessary how many similar businesses are in the area already, but rather whether there is still room to grow in a particular neighborhood.
Price is always a key attribute and the space should fit your budget (more on that in Part II).
Space is like a blank canvas and can develop into any identity you chose to create. Here are the fundamentals to consider when planning for and creating your own space.
The first question that many people ask is whether they need street level retail space with a storefront and the answer will vary for everyone. You can be just as successful on an upper or lower floor as you can on street level.
However, there are additional challenges to overcome on upper and lower floors. First, you have to have a strong marketing plan that will drive people to your studio so you are not relying on foot traffic.
Second, you have to find a building that will allow fitness to operate on an upper floor. Many will not accept the use due to the noise and vibration they generate, which may disturb the other tenants of the building. Even if it’s a quiet use such as yoga, it may not be acceptable to the building because fitness businesses generate heavy foot traffic and elevator compared to a general office tenant. For example, if you have a 35 person class capacity and you run classes every hour, there will be 70 people entering and exiting the building every hour.
Lower Levels are very hard to find, but offer a better solution than upper floors. Noise and vibrations are better contained since there are no tenants beneath you. There is usually a stairwell that can be used instead of the building elevators and you may even be able to get a small street presence. Conversely, lower levels offer little natural light or windows and you have to make sure they are legally usable.
The amount of space you need will vary greatly by the type of program(s) and additional amenities you offer. Floor space dedicated to exercise is only one component. You must also consider the non-exercise space such as lockers, bathrooms, office, reception, juice bar, sauna, and even circulations space. Circulation space is the space people need to comfortably walk between equipment and get from one area to the next.
The other factor you need to understand is the concept of Rentable Square Footage (“RSF”). RSF is a gross number that takes into account space that is not actually inside your walls such as hallways, lobbies, property lines, etc. It’s a long list of what is collectively called the “non-rentable areas of the building.” What is inside the walls of your space is known as the Usable Square Footage (“USF”). The difference between the Rentable and Usable Square footage is known as “loss factor” which is approximately 38%.
To try to make this simple. You will be quoted RSF and this is what rent is based on. What you get for your exclusive use inside your walls is USF, which is approximately 38% less. Many people wonder why they would ever pay for 38% of space they don’t use, but you do use the lobbies, hallways, elevators, even the riser pipes that bring the electricity to your space go into the calculation of loss factor. Try not to get too bogged down in RSF vs. USF because it’s almost impossible to do your own accurate calculations. You would need an architect to do a full survey of the building to assess this and it is not worth the time or expense to do so.
The key take away with loss factor is that you must accept it as a fact of commercial real estate. You should focus you time and energy on these two questions: Does the space work for my business and does the price work for my budget?
To determine whether a space is large enough to accommodate your program, use the measurements below during your initial planning and then adjust accordingly as you see each space. “Per person” means the total number of people you will have on the floor at any one given time:
OTHER PHYSICAL ATTRIBUTES
Once you have found a space that you like in a neighborhood that works for your studio, the next question is whether you can afford that space and we will explore the financial aspects of opening your own studio or wellness center in Part II soon.