If you’re thinking of opening a business, you likely already know that leasing retail space is one of the biggest expenses small businesses have. Renting a retail space is a little different from renting a house or apartment to live in. You’ll want different things out of a retail space.
You’ll want it to be in a good location for attracting customers, for example. You may want a space that’s move-in ready, or you may be willing to do some improvements to fix it up. It’s often best to go through a listing agent to find a space that meets your requirements, but you can also look for a space yourself online. You’ll need to look at potential locations, choose one, and then negotiate a lease. Here’s how to make it all happen.
Set a Budget
Start your search for a retail space by deciding how much you can afford. Retail businesses can usually expect to pay five to 10 percent of their monthly sales in rent. When calculating your budget, err on the side of caution. A more conservative budget will leave you with extra money for the day-to-day operation of your business, which will almost certainly come in handy.
Determine Your Needs
How much retail space do you need? It can be hard to find the balance between enough space and too much – and that’s a problem because you can’t afford to pay for space you don’t need. Don’t forget to consider how much room you’ll need for storage of stock, back offices, dressing rooms, bathrooms, employee break spaces, and checkout areas. It’ll be much easier to find good spaces to compare once you’ve figured out a size requirement.
Find a Few Properties and Compare Them
When you’re looking for a retail space for lease in Tempe or in any major city, it’s a good idea to use a professional listing agent or real estate broker. A broker will know your local commercial real estate market and will be able to give you access to the best retail spaces for rent in your area. You’ll have to pay a list fee of six to 10 percent of your total lease costs, but you can sometimes get the landlord to pay for the broker’s fee in negotiations.
If you don’t want to pay a broker’s fee, and you know your local commercial real estate market well or at least have a good idea of where you want to put your business, you can look for properties yourself online. Just typing your basic requirements – for example, “500 sq ft retail space in New York” – can return a list of properties that meet your requirements. You can also use an online tool like LoopNet or Catylist to find listings.
Once you’ve found four or five retail spaces that meet your needs, compare them to find the one that works best for you. Some factors you may want to consider include location – if there’s a lot of foot traffic in an area, or there are lots of other compatible businesses nearby, you’re going to get a lot more business. For example, coffee shops go well with bookstores and shoe stores go well with makeup and clothing stores. You’ll want to look at spaces that are near your customers and even near your competitors – their presence means that customers who are interested in what you have to offer are going to be nearby.
Review the Lease and Negotiate for Better Terms
A real estate broker can help you decipher the lease, and can even work with the landlord on your behalf to negotiate changes. You should read through the lease and talk to your agent or a real estate attorney about what should and shouldn’t be in it. You may be able to negotiate better terms, such as lower rent if you plan on staying longer than three years, or a consistent payment to cover utilities included in the base rent. Try to build an escape clause into your lease, so you can get out of it if something unexpected occurs, like damage to the retail space or contamination of some kind.
Renting a retail space requires some knowledge of the commercial real estate market and careful consideration of what your customers want and where they can be found. Opening up a physical storefront can be a harrowing experience for a new entrepreneur, but it’s one that’s worth going through to get your dream business.