Pros and Cons of the Different Types of Retail Locations

Commercial retail locations are available in many different forms, and each one has its advantage and disadvantages. There are many factors that impact choosing a location, and selecting the right one will depend on your business, budget, and community.

For a brick and mortar business, choosing a retail location is a major decision. From the cost of rent to the level of foot traffic to regulations you must follow, the type of retail space you select can impact many aspects of your business.

Mall Space

From kiosks to large anchor stores, a mall has many retailers competing with each other under one roof. In a mall, there are generally three to five large chain stores and dozens of smaller retail shops.

Before selecting this type of location, learn about local trends in mall shopping and how that particular mall is doing before you agree to rent space there. Overall, mall shopping has declined since the Great Recession, and in the United States, the number of store closures is increasing yearly. However, many malls expect to see growth, adding experiential attractions to bring in new customers and drive foot traffic.

Pros of Mall Space

• Lots of foot traffic
• Anchor of community shopping
• Less advertising needed for customers to find you

Cons of Mall Space

• Immediate competition from other stores
• Regulations and rules from mall management
• Higher rent than other retail locations

Shopping Centers

Strip malls and other attached, adjoining retail locations may have as few as three units or as many as 20. The types of retailers and the goods or services they offer will also vary. Before signing a lease, always investigate both the availability of parking and any regulations that the property has for retailers.

Pros of Shopping Centers

• Fewer rules and regulations for retailers
• High visibility from street
• Lower rent than many malls
• Often served by bus routes/public transit

Cons of Shopping Centers

• Less foot traffic
• Parking can limit accessibility
• Lack of modern facilities and updates

Downtown Area

Many communities are hard at work to revitalize their downtown areas, and retailers can benefit from this effort. You'll often find many older, well-established retailers in a downtown area. Because space is usually limited, these locations are often good choices for smaller or specialty stores. However, there are chains and big-box retailers that can make use of downtown retail locations, especially if they are willing to build up rather than out.

Pros of Downtown Areas

• More freedom/fewer rules for business owners
• Attractive to younger customers who prefer urban living
• Heavy foot traffic

Cons of Downtown Areas

• Expensive or limited customer parking
• High rent
• Limited ability to expand/adapt your space

Free Standing Retail Locations

This type of retail location is any stand-alone building. It can be tucked away in a neighborhood or right off a busy highway. Free-standing locations come in many sizes and can be appropriate for any type of retail business.

Pros of Free Standing Retail

• Few or no restrictions from landlords
• Reasonable cost per square foot
• Limited immediate competition

Cons of Free Standing Retail

• Local zoning may restrict retail activities
• Lack of foot traffic
• Requires regular marketing to attract customers

Business Parks

An office building, or a business park where many office buildings are grouped together, is similar to a strip mall or outdoor retail center. These are often good options for a retailer whose customers are other businesses.

Pros of Business Parks

• Tenants share maintenance costs
• Buildings have an upscale and professional appearance
• Easily accessible to other tenants

Cons of Business Parks

• Lack of foot traffic
• Corporate feel less suited to B2C businesses
• Lack of visibility for storefronts/signs

Home-based Retail Stores

Millions of retail businesses start in their owners' homes. Some may eventually move to a commercial store location, while many remain in the business owner's spare room, especially if the business primarily operates online or works with distributors.

Pros of Home-Based Retail

• Inexpensive to start
• Flexibility balancing work and family life

Cons of Home-Based Retail

• Regulations can restrict use of space, accessory structures, or number of customers you can have on-site at once
• Lack of parking
• Difficulty separating work and family life
• Limited room to grow/expand

Choosing a Brick and Mortar Retail Space

As consumer shopping patterns change, businesses also have to choose their location carefully. In many regions, retail store closures have increased since the Great Recession in 2008. Across the United States, there were 5,864 store closures in 2018; that number rose to more than 7,000 stores that closed in 2019.

However, additional retail spaces also opened up during each year, and many consumers still want to do their shopping in-person. Even among millennials, the generation often accused of ushering in the downfall of brick-and-mortar retail, more than 80 percent of consumers prefer to shop in stores.

Brick and mortar retail spaces are still a good choice for many businesses. The key to creating a sustainable business model is finding the right kind of retail space for your business, customers, and community.