How to Find and Negotiate Retail Space for Rent
When you’re looking for a retail space for rent, you want to choose the right property the first time. Luckily, by using the right approach, you can locate and lease the best commercial property for you.
By being methodical and detail-oriented, you’ll be able to locate a retail space that genuinely meets your needs, as well as negotiate a contract that leaves you in a good position. If you aren’t sure how to begin, here are some renting retail space steps you should take to get it right.
What to Consider Before Renting Retail Space
Finding real estate is tricky simply because there are so many options available. It’s hard to narrow down the list of possibilities, especially if you hop right into a commercial property search before considering your needs.
If you want to get the right retail space for lease, here are a few areas you need to look at first.
Things to Look for in Retail Properties
Location
When it comes to rental property, it’s all about location, location, location. Retailers need a location with a suitable amount of traffic, as well as one that works for the kind of retail business they are operating. Often, you want to make the location of your retail spaces a priority, so figure out what physical areas will work best for you first.
Size
When you’re choosing a retail space, leasing a property that’s the right size is a must. Along with considering the total amount of square footage (sf), you may need to take a close look at how the space is divided.
While some retail space for rent is essentially a large, open room, others have permanent walls. That may dictate the amount of office space, storage room, and floor space you have, so you need to make sure the arrangement will work for you.
Estimate how big each functional area needs to be, or craft up a floorplan to serve as a guide. Get measurements for fixtures and use the real dimensions in your design.
Features
All commercial real estate properties have unique features. For example, some may have more street-facing window display space than others. Certain properties will be more “finished,” while others may require you to install your own flooring, temporary walls, and more.
Before you start your retail space for lease search, consider what sort of features as must-haves and what are nice-to-haves. Also, decide in advance how much work (and money) you’re willing to put into finishing the property.
Deciding on Your Budget
When you figure out your budget, you need to look beyond the cost of the monthly rent. Depending on the kind of lease you end up with, you may be responsible for additional expenses, including:
- Insurance
- Property taxes
- Utilities
- Shared amenities
- Remodeling
Generally, you want to allocate no more than 10 percent of your gross monthly sales to renting a space. Once you have that specific figure, you can estimate how much will need to go to each cost area, allowing you to craft a tentative budget.
How to Find Retail Space for Rent
Conduct an Online Search for Retail Space for Rent
Sometimes, an online search is the easiest way to get a feel for an area. You can head to any major commercial real estate rental website or use Google to search for “retail space for rent near me.”
Once you find a site, take advantage of menu filter options, sf ranges, keyword search terms, and city or zip code limiters. Once you have the initial results, continue drilling down. Your goal is to find a solid list of options, giving you a general direction.
Find a Commercial Real Estate Agent
Working with a commercial real estate agent can make finding a property simpler. They’ll listen to your needs and then identify properties that are the closest matches. Plus, they are often aware of current real estate trends in the area, including which retail spaces are investment opportunities, in-demand, or may be easier to negotiate down.
Tour All Potential Rental Properties
Ideally, you never want to rent retail space without first touring the property. Pictures can be deceiving and may not accurately reflect the current state of the real estate.
Expenses Involved When Leasing Retail Space
Deposits and Other Upfront Costs
When you rent commercial real estate, you may have some upfront costs you need to handle. For example, security deposits are a norm for nearly any kind of rental.
If you’re responsible for utilities, you may need to pay deposits with your utility providers, too. In some cases, insurance has to be paid annually or semi-annually in a lump sum, turning that into a potential upfront cost.
There could be other deposits or expenses as well. Generally, you can learn about these when reviewing the lease or when speaking to the landlord.
Monthly Rent
If you find your perfect property, how much you’ll need to spend in rent is usually spelled out for you. At a minimum, you’ll be able to see a ballpark figure that serves as a starting point for negotiations.
There are certain factors that play a big role in pricing, including:
- Location
- Lease Term Length
- Retail Space Condition
- Competition
Retail spaces that are in high-traffic areas with convenient parking, close access to major retail centers, and other pluses usually cost more. Additionally, competition for those properties may be higher, driving the price up.
If you’re open to a longer lease term length, you may be able to secure a lower price. Similarly, if the retail space requires more work to get into serviceable condition, you may pay less than if a rental is essentially ready to go.
Types of Retail Leases
Different types of retail leases each place unique requirements on the renter and landlord. While owing monthly rent is part of every retail space rental lease, the rest of the responsibility may vary. Here’s an overview of common types of retail leases and how they split the financial burden:
- Single Net Lease – renter pays property taxes and utilities while landlord handles insurance, building maintenance, property repair, and most other costs
- Double Net Lease – renter pays property taxes, utilities, and insurance, while landlord pays for building maintenance and property repair
- Triple New Lease – renter pays for all property expenses aside from major structural building repairs
- Modified Net Lease – renter and landlord equally split all costs outlined in the agreement
Tips for Negotiating Retail Space with Landlords
In many cases, you’ll want to work with an agent or a commercial real estate lawyer when it comes time to negotiate. That’ll give you an ally who is a rental lease negotiation expert.
When it comes to an initial offer, it’s wise to aim between 10 and 15 percent below the asking rent. That serves as a solid starting point, increasing the odds that you’ll end up in the middle.
If you’re looking for more bargaining power and believe the location will serve you long-term, you may want to request a lower price along with a longer lease term. If you commit to a three-year lease, you may get a better deal.
Alternatively, agreeing to a higher price for two years might allow you to secure a discount on the next renewal. Just make sure that the arrangement is in the formal agreement.
It’s also wise to request a clause that prevents your landlord from renting out any of their nearby properties to competitors. This is especially true in popular retail areas like shopping centers or strip malls.
Ultimately, everything is negotiable. If your prospective landlord is set on a price, consider requesting additional perks. That way, you both feel like you’re getting the right deal.
