Common Retail Leasing Myths – And What To Look For Instead
As a retailer you’re probably pretty focused on the bottom dollar. But when you’re comparing leases in the search for your next shop, leave the price tag obsession to your customers. You have more important things to think about…
MYTH 1: It’s all about the location, location, location
Look, we’re not going to lie – this saying didn’t get its own TV show for nothing. But if you’re not in the position to lease a shop in the very best spot for you, just capitalise on someone else’s position. Look how many people stream in and out of your local supermarket, or literally cluster outside that great suburban cafe every day. Those people could be walking past your very affordably-leased shop to get there.
Takeaway tip: Retail outlets that people return to regularly are called anchor stores. Cruise around the city for a few weeks, noting where they are, then set out to moor your store near one.
MYTH 2: Finding the cheapest lease will save me the most money
Well, you’d think so wouldn’t you – this is how it is in the “real world”. But your industry isn’t called “the world of retail for nothing”; it is its own beast. First, there’s the matter of the cheapest shop possibly not being the most welcoming – and when your business relies on getting people through the door, welcome them you must. Then there are the complex ins and outs of your retail lease. Things such as “Incentives” and “Concessions” have to be taken into serious consideration. If not, saving a few thousand upfront may cost you a few thousand (at that place) down the road.
Takeaway tip: Beware of false economies. Look at the total occupancy cost over the term of your lease, rather than just the listing price. And think of how much money you will save in advertising by having a high profile with raving customers.
MYTH 3: I’ll need to set aside a lot of money for the fit out
It’s understandable if you’re all set to go to town on your shop’s fit-out – in retail this is almost as important as the shop itself. But, if you’re needing to get your cash register ringing straight away, there’s a more cost effective approach to take: looking for retailers in the same line of business as you who are about to vacate their premises. You may find their shop is already set up with all you need, bar a tin of paint.
Takeaway tips: Start looking at shops being vacated by people doing what you do – and you may not have to do very much to them at all.
MYTH 4: I should let my lawyer make all the decisions
It’s a good idea to get a lawyer to run his or her eye over your contract, but don’t be tempted to hand over the whole decision-making process. Remember that it’s a lawyer’s job to point out any potential pitfalls – which is great – but they may be overly cautious to ensure you can’t blame them later for not warning you of something properly. Only you know when a property is right for your business’s needs. Seek counsel, but make the final judgement yourself.
Takeaway tip: Listen to your lawyer’s advice, but don’t let them speak for you.
MYTH 5: There’s no room to negotiate
“I’m not buying this shop, so I can’t really start negotiating”. Yes, you can. Retail leases are customisable – just approach it in a way that benefits both you and your landlord. For example, if you ask your landlord to contribute to the Tenancy Improvements, make sure they’re for things that add value to their building as well as your business. You may also be able to negotiate a small period of free rent at the end of your tenancy – but only if you’re a proven great tenant who is willing to sign long-term. Ask, and you may, possibly, receive.
Takeaway tip: Negotiating a retail lease is a tricky business – consider appointing a broker to search on your behalf. Find the right one for you at Bayleys.