Guess What's Most Important in Commercial Real Estate: Begins With an "L"

Small businesses are doing very well in the Kendall Park/Franklin Park, an attractive area because Route 27 is so busy, says Priya Rajan, real estate broker at Hershey Realty in Kendall Park. Like the real estate adage goes: "The three most important things are location, location and location."

Small businesses in Kendall Park and Franklin Park are doing "very, very well," says Priya Rajan.

Still, there are many vacancies in commercial properties, mostly a result of  the mismatch in the size of the spaces available for rent versus the size that prospective renters are looking to lease. The one property with the most vacancies is probably Franklin Towne Center, which will be exacerbated when Stein Mart leaves later this month.

Because the rental rates in the area are higher than other areas, businesses need to be careful to rent spaces that are the right size, Rajan says. Too big of a space increases expenses for the renter, but if the space is too small, it may limit its business growth.

A lot of the businesses in the area are very family-friendly-- learning centers, dance studios and restaurants, with a preponderance of  South Asian restaurants. "We need to get other cultures, ethnicities," she says. Already, there has been turnover in Indian restaurants. With so many restaurants in the area, some landlords are now hesitant to rent to restaurants, a notoriously difficult business to succeed in.

Leverage in negotiating leases or property sales mostly depends on location. But there are many other factors that influence negotiations, such as the mix of businesses within a strip mall. "You want to have neighboring tenants that are complementary."

Another factor is how much space the renter is looking to lease. For example, a business looking to rent 7,000 sf would have a lot more leverage in negotiating rent than one seeking 1,500 sf of space.

Financing can be difficult, Rajan says. Small Business Administration loans are not easy to obtain, especially if you don't have any collateral or property. When a restaurant is up for sale, "they're looking for cash buyers." Banks, as well, are reluctant to lend to small businesses unless they have a lot of collateral.

In terms of municipal regulations, it doesn't seem as though businesses view one town as being more business-friendly than the other. Some businesses, though, such as learning centers, have restrictions on where they operate, Rajan says.

Hershey Real Estate is also a landlord.

While most real estate brokers will deal with both commercial and residential real estate, Hershey Real Estate has a significant presence in commercial. Hershey actually owns its building on Route 27 in Kendall Park. So it's a landlord as well. Another realtor-landlord, Kuker & Kessler on the Franklin Park side of the street, deals mostly in residential real estate.

Weichert's commercial real estate business is mostly run from its Edison office, and Coldwell Banker has commercial real estate offices in Madison and Parsippany. Century 21 Abrams Hutchinson & Associates also does some commercial real estate business.

"This Stretch of 27" covers business on Route 27 between Finnegan's Lane and Route 518. What's your story? Email me at lkiesche@gmail.com

Liz Kiesche
Liz, a business journalist, formerly worked for Bloomberg News in Princeton and New York.