How to Find Space in Small Markets

Written by Krista Leetmaa, M.U.P., Director of Corporate Development at Landmark Advisory Services



Canada is an enormous country and in-between our major cities are a multitude of small municipalities, also known as tertiary markets. These places don’t have an established commercial real estate scene like we’re used to seeing in places like Toronto, Montreal, or Vancouver. As a business, finding and leasing quality space in one of these markets can be a unique challenge that requires a different approach. Specifically, it requires creativity, agility, deep expertise, and a strong network of connections to lean on.


For companies with a presence in secondary and tertiary markets finding space to occupy in small markets can be a challenge
For companies with a presence in secondary and tertiary markets finding space to occupy in small markets can be a challenge

Common Challenges:


  • Inventory of existing buildings is limited and often of poor quality

  • Few areas zoned appropriately for your intended use

  • Speculative development is non-existent resulting in lack of space ready to occupy

  • Most buildings are usually owner-occupied

  • Lack of commercial real estate services (market mainly serviced by residential agents)

  • Limited number of physical buildings in the market


With so many limitations, what options are available to ensure you secure the space you need to grow and/or expand your operations?



Option A: Traditional Real Estate Broker


Traditional brokerage firms are renumerated solely via commission which is shared between the firm, the broker and any local office they may use to locate space in a market outside of their designated territory. This system means that there is very little financial incentive for a traditional broker to invest the amount of time or effort needed to secure space in a small market. Typically, their efforts will comprise of the following:


  • Query their brokerage database of publicly listed availabilities.

  • Communicate with their affiliate office in that market, if there is one, or the urban center closest to it.

  • The project will generally be classified as “high maintenance” due to high effort and low potential fee, meaning it does not get pursued with a persistent sense of urgency.

  • Minimal proactive follow up.

  • Publicly available property information is not usually validated leading to sites being presented which are not available or do not actually conform to your needs.


Here’s an example: Assume you are looking for space in the small town of Courtenay, BC. The office that manages your account, Montreal, will reach out to their affiliated office closest to that market, either Vancouver or Victoria/Nanaimo. Then this secondary broker will attempt to service Courtenay without necessarily having any experience in this market. Furthermore, their access to market intelligence is significantly diminished when not working in a major market. At each step in this process, the broker is restricted to solely using local brokers from their same company and their fee gets diluted with each step.


Option B: Partnering with Landmark


Landmark’s transaction managers are not compensated by commission, but rather are salaried employees. Their job (and its security) are based on building relationships in local markets and finding you space for your business. They are measured against these results and can provide focused and persistent efforts in ways that traditional firms simply cannot.


Finding the best space for your business in a small market can often be a long-term process as you deal with lack of inventory and unsophisticated stakeholders, but you may not have the luxury of time. Landmark uses a two-pronged approach which combines a long-term and a short-term strategy, allowing you to operate your business while not compromising on the long-term future home for your operations.


What are some short-term solutions?

  • Securing temporary space and negotiating flexibility into your lease terms.

  • Sourcing trailers, prefabricated structures, or other temporary structures.

  • Collaborating with third party logistics companies.

  • Identifying businesses that may have excess space (space sharing).


Meanwhile, how do we execute our site search for long-term solutions?


  • Proactively engage our established network of thousands of brokers, developers, landlords, and economic development officials, trade associations, and more, which has been grown over 20+ years in all Canadian markets, big and small.

  • Execute a zoning analysis to determine where you can actually locate and harvest these areas for opportunity.

  • Weekly monitoring of public and online listings (not restricted to any individual firm)

  • Scour local classifieds and other sources unique to the market

  • Speak with every local realtor in the market

  • Establish communication lines with the municipality and Economic Development office

  • Lean on pre-established relationships with landlords (chances are that Landmark is already involved in this market through an existing client)

  • Identify potential buildings of interest and cold call businesses to uncover off market opportunities

  • Pursue all potential avenues, such as:


- Buildings available for sale (in which we can partner with an investor and offer lease options) - Buildings which can accommodate expansion or reconfiguration to fit your space needs - Businesses for sale that occupy space that fits your requirement - Buildings that can be repositioned and re-zoned (for example, transforming big box retail into wholesale distribution)


With Landmark, you will have a dedicated team of urban planners, market intelligence specialists, and transaction managers, all working together in the same ecosystem, devoted to your search. The work does not stop until you have moved in to your new space, and you will receive regular reporting on search efforts and potential opportunities to ensure you stay proactively informed.


We’re partnering with you for the long term and have a plan in place to manage your search. Our model allows us to persistently devote the time and resources to your project, regardless of its size.


 

ABOUT LANDMARK

Landmark Advisory Services is a commercial real estate consulting firm, specializing in the representation of Corporate Tenants and Occupiers. As an external real estate department, Landmark has acted as an extension of its clients’ businesses for more than 30 years. Landmark can be contacted at service@landmarkcre.ca.