It can be a little tricky leasing retail space the 1st time.
If your small retail business needs space, here are three of the top things to think about:
Location, Location, Location
Location is key to any commercial space turning a profit, but it’s important to understand location in context with the needs of your business. Very few things can make you regret a lease like the wrong location.
For some industries a prime location is everything. For example, if foot traffic is a key component to your success, you’ll need a commercial space that sees a lot of hustle and bustle. The retail industry is a great example of an industry that needs to be seen by the community, in a prime location. In the long run, the higher lease prices per square foot is a lot cheaper than not having enough customers.
However, even though a prime location can be key to some types of businesses, a prime location is not key to every industry. If you’re looking for warehouse space, or office space that’s only used to get work done (as opposed to meeting with clients), you may be better off a little further from beaten trail, away from higher commercial real estate prices. If customers don’t need to come to you, the extra dollars you’ll spend on a prime location may not be worth it.
Location is important, so carefully consider the needs of your business and customers before signing a commercial real estate lease.
Additional Fees or Expenses
It’s important to know about and understand everything you’ll be required to pay for in your new commercial lease. Fees (not the rent price) often determine if a business can truly afford the space they are looking to lease. Often, the most surprising thing about a commercial real estate lease is how different they are from other types of leases.
Your lease may require you to pay a percentage of sales, or fees for things like taxes, insurance, and maintenance for common areas. That’s in addition to the expense of maintaining the space that you are renting, if it’s required in your lease.
Before signing a commercial real estate lease, make sure you understand the true cost of maintaining it.
Options In The Lease
A lot of uncertainty can surround your first few years in business. Try to make sure that you’re surprised by as little as possible, especially your competition or a significant loss in foot traffic.
An exclusivity clause can prevent the landlord from renting space to a competitor on the same commercial property as your business. Adding this clause can save you a lot in lost revenue if you’re counting on the location of your business to be more convenient to your customers than your competitions location.
If, on the other hand, you’re counting on foot traffic from a popular store on the same property, you may want to consider a co-tenancy clause in your contract. A co-tenancy clause would allow to you break the lease if the anchor tenant leaves and your landlord doesn’t provide a new one within a certain period of time. This clause can save your business from failing if you’re counting on being seen by customers from a large commercial chain.
The clauses that didn’t seem necessary when you first leased the space could make or break you in the long run. How your customers find you, their other options for the same products or services, and if your neighbors will account for a good bit of your own revenue, should all be seriously considered when negotiating a commercial real estate lease.
Your commercial real estate lease will have a big impact on the profitability of your small business. The first commercial real estate lease you sign could determine whether your business thrives or just survives. Make sure you’ve carefully considered the location, the real cost of the space, and if your lease contains all the clauses you need to succeed.