How to Rent a Retail Space
The decision to open a retail store takes considerable thought and planning. Retail locations vary from isolated stores to strip centers to malls. Depending on your products, any one of these venues may work well for your business. Research the area to locate the most profitable retail areas and to find the locations of your competitors. Armed with relevant information, you can locate and rent a retail space that will be popular with shoppers and profitable for your business.
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Instructions
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Retain a real estate agent and attorney to help you locate and negotiate the lease for the retail property. Licensed real estate agents can help you find an appropriate space for your budget. An attorney will help you understand the lease agreement and negotiate terms that are agreeable to both you and the landlord.
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Choose a location based on automotive and foot traffic, size and cost. Many retail spaces rent based on cost per square foot. Your retail space should be large enough to comfortably house your current products and provide for reasonable future expansion. Foot traffic often drives the bulk of retail sales so choose a popular shopping location. Also consider the price point of your products when choosing a location. High-priced products will necessitate a retail space located near stores that carry products of similar quality and cost.
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Review the proposed lease agreement provided by the landlord. Determine total costs including square foot cost, maintenance, utility expenses, build-outs, property taxes and deposits. Supply a copy of the lease agreement to your agent and attorney for review and comment. Have the attorney explain any language that you do not understand.
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Create a list of negotiation points and questions. For example, does the lease allow you to make building improvements such as adding or removing walls and painting? If so, ask if the landlord will pay for any of the expense and will he require prior approval of the improvements.
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Negotiate with the landlord with assistance from your attorney and agent. Ask for any items that you would like to have in the lease such as a lower price, improvement allowance or clauses for sublet and contract cancellation. You will have more power to negotiate in your favor in locations where the landlords are struggling to fill retail space. Add everything you agree upon to the written contract.
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Tips & Warnings
If you are planning a future expansion, such as adding a café to a bookstore, check the contract language to ensure that the future business is permissible. Some municipalities restrict the types of businesses in certain areas so if you are planning to open a café in the future, make sure that restaurant exclusions are not in place.
If you are unsure about how long you will operate at the location, negotiate a short lease with a yearly option to renew rather than a long-term lease.
Request a clause in the contract that allows you to cancel if the retail area significantly declines due to lower sales or loss of foot traffic.
Most if not all landlords will ask that you personally guarantee the lease even if it is in the business name.
Add rent increase limits to your contract to ensure that the rent amount rises on a reasonable basis that you will be able to afford.
References
- Photo Credit sign. gift shop image by L. Shat from Fotolia.com
