5 Things to Consider Before Renting Retail Space
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There are specific aspects to be thinking about when it comes to renting retail space, compared to other forms of commercial property. Some of these are to do with the building itself, and the location, others are in the details of the leasing, the negotiations before you sign a lease, and the specific nature of the market.
Define your budget When Renting Retail Space
It goes without saying that you need to think about what you can purchasable long before you start looking for a new, or maybe your first shop. Have a clear red line that you won’t cross at the top end, but also have the lowest price and a mid-range, and compare what’s out there with your expectations.
It’s essential that you are aware that the base rent – one of the advertised or first offered by a landlord – is by no means the bottom line cost. On top of rent, there are a host of charges and fees that aren’t advertised: business rates, service charges, the cost of repairs and maintenance, and energy bills, to name a few. Many first-time renters have had a nasty shock once they have added these costs up: between them, they will be the maximum amount as or quite the rent itself.
Bear in mind also that rent on retail premises is paid quarterly, on set calendar dates. It is due whether a landlord has sent a tenant an invoice or not – it’s the legal obligation of the tenant to pay their rent. And one among these payment dates is, rather cruelly, Christmas. The toughest time of the year for retailers is usually post-Christmas: it’s the time when most businesses enter administration, under the load of the December rent payment.
Lease or license?
Retail tenants are often unaware of a choice to occupy a billboard property without signing a lease: through a license. There are agreed to this but also major downsides.
The benefit of taking a license is that it is a low-commitment option for renting a store on a short-term basis. As a result, this is ideal for a brand wishing to douse its toe into a market or open a pop-up store for a short time.
The downside is that it’s much more precarious for a licensee compared to a corporation leasing an area. There isn’t what’s referred to as ‘security of tenure’ which guarantees a tenant certain rights, including ‘exclusive’ access to a property, i.e. the right to not allow a landlord to enter. A license can be revoked with a change of ownership, and there is no guarantee the property will be available when the license is terminated.
Find the perfect spot of Retail Space
In retail property much more than for offices or warehousing, your surroundings are particularly important to trade. If rent is reasonable it’s actually because of the environment and low footfall, and while it’s tempting to save lots of money, remember that without the passing trade you won’t do much business.
It’s also important who’s near you, whether or not they are competitors or other sorts of business which may help or hinder trade. This consideration is part of the lease negotiations, and a landlord of a shopping center will usually be willing to discuss a clause which means they won’t, for example, place you directly next door to a competitor in the future.
Negotiating lease terms
Remember that base rent isn’t set in stone. Where there tends to be little or no leeway within the residential renting sector, in retail property landlords expect to be beaten down from the first price during the negotiations, and will often offer incentives, such as rent-free periods, to get a tenant in.
When it comes to negotiations you need to be tough, and remember that you can negotiate almost any aspect of the lease if you know-how – especially if you have a good adviser on your side.
Remember you’ll always walk off from a deal. Even when the initial broad strokes of a deal are put in writing – during a document referred to as a heads of terms agreement – there’s still room for negotiation and even to tug the plug if you aren’t happy.
That includes over fine details like whether a lease entails rent reviews and the way often these are, whether it permits you to sublease a property, the obligations on service charges, and many more considerations.
Information is key for You to Rent a Retail Space
In all cases it’s essential that you do thorough research before you start, and as you go through the search process. Realla’s search portal provides a wealth of data about the properties out there on the market with numerous tools to refine and filter results supported your own requirements and budget. And the market data function gives you access to detailed intelligence and native research into an entire city, town, region, or a private area of interest.
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