When you operate a retail brand, your storefront is everything. And when you consider that the average real estate lease term length is 3-5 years, it’s important to choose your space wisely. That’s why we’re here to discuss the three key things to look for in a retail space – before you sign your next lease. Read on!
A Prime Location
Location, location, location! One of the most important features to look for in a retail space is its location. The area’s foot traffic and demographic makeup should be two of your top considerations. What sort of shoppers stroll the area, and do they align with your target customer?
Another important thing to consider is the climate of the local business community. Are the businessowners supportive of each other? Do they collaborate? A supportive group of entrepreneurs will help you succeed – and an ultra-competitive environment most likely will not.
In addition to your customers and fellow businesses, you also need to keep your employees and contractors in the forefront of your mind. What local amenities will be available to your staff? From nearby restaurants to convenience stores, the more you accommodate for a healthy work-life balance, the better talent you’ll attract. You must also keep in mind the parking and public transportation availability – for your staff, contractors, delivery trucks and more.
The Right Price
The price should absolutely be right in your new space. Ideally, your lease payment should amount to 3-8% of your gross revenue, depending on your industry. For example, a store with lots of big-ticket sales (like an electronics store) usually has rent that is about 2% of its gross revenue. On the contrary, clothing stores typically average rent that’s approximately 8% of their gross revenue. Curious what your target rent is? Below are sample amounts by industry:
|Industry||Percentage of Sales Allocated for Rent|
|Clothing and Apparel||7.66%|
|General Merchandise Stores||3.86%|
|Furniture and Furnishing Stores||5.98%|
|Food and Drink Establishments||5.81%|
|Electronics and Appliance Stores||2.09%|
|Books, Hobby, Music, Sporting Goods Stores||3.30%|
|Health & Personal Care Stores||3.37%|
And don’t forget about your down payment, and other expenses like utilities, property taxes, insurance, and common area maintenance (CAM)!
Properly Sized and Equipped
Once you’ve found a space that’s in a location that fits your target demographic – and your budget – it’s time to take a deeper look at the store’s features.
First, you need to make sure the space is the right size for your business. To calculate your target square footage, add together the sizes of the different areas in your store: for example, your sales floor, inventory storage, office, kitchen, bathrooms, and dressing rooms. Not sure how big your sales floor should be? Here’s a handy formula: Planned sales volume / average sales per square foot in your industry = sales floor space
If you’re just starting out, consider a pop-up shop, or a “store within a store.” These are more affordable than standalone shops, can help familiarize your target market with your brand, and helps the storeowner offset the high cost of rent. When your goal is to grow your baseline brand awareness, it’s worth doing some research and finding a complementary store in your target area to partner with!
Next, make sure the space has the features you need to make your store shine. Here are some factors to consider:
- Lighting: Can the lights be dimmed? Can alternative lights be brought in?
- Loss Prevention: Are there cameras (or other tactics) to prevent theft?
- Emergencies: Is there adequate fire and police presence in the area?
- Sales Restrictions: For example, are there restrictions on Sunday sales (blue laws)?
- Wi-Fi: What’s the Wi-Fi availability like? This is extremely important so that you can process credit card transactions on your mPOS system.
Last but not least, don’t forget to keep in mind your target shopper – what do they look like? What is their occupation? Where do they live and what do they do for fun? When you boil it down, you need your retail space to match your target audience. For example, if your customers typically have small children, make sure you build in extra aisle space to accommodate strollers. And if you are selling trendy items, you’ll need a clean, modern, easy-to-manage space to match.
We hope these tips are helpful while navigating retail space leases. Looking for more retail know-how? Browse our Small Business Tips!