Retail Leasing

Business.com / Starting a Business / Last Modified: February 22, 2017

Looking to open a retail store? In most cases, you'll lease (rather than buy) a space from a landlord and then make it your own. ...

Looking to open a retail store? In most cases, you'll lease (rather than buy) a space from a landlord and then make it your own. Not every space is right for every business, so don't sign on the dotted line right away. Take your time to make sure the lease is right for you since the right retail space can:

  1. Serve your needs now and give you room to grow in the future.
  2. Draw in or deter foot traffic, the lifeblood of most retail businesses.
  3. Be a financial drain if you choose a poor space.

Sign with an agent

To find commercial properties to rent, you need to contact commercial real estate agents.

Hire a leasing lawyer

In case you don't already have an attorney to assist you in business matters, consider finding a specialist in landlord/tenant relationships to make sure you don't sign a lease that's detrimental to your future growth.

Look where your customers are

A business without customers won't be a business for long, so consider using demographic tools to examine potential retail areas to see whether the residents fit your image of ideal customers.
a wealth of demographic data available on its Web site, such as state income, tax return breakdowns by Zip code, and projected returns for the upcoming year. Data on income by counties and county-to-county migration is also available from the IRS by mail.

Find your comfort zone

Each town has its own commercial zoning regulations, so don't waste time looking at buildings that can't house your business. You can ask the landlord whether her building is zoned for your business, but a safer approach would involve a trip to city hall to find out where commercial activity is allowed.
Boston, New York City and San Diego), and a Google search for the words "zoning," "map" and your city name might be all you need. Cities often include descriptions of their commercial zones, such as how many feet of sidewalk must be clear, which hours a shop can operate, and a hundred other details; New York City has a great description of its commercial zones and gives you an idea of how they might be described in your town.

See who pays for what

You'll probably be quoted a price per square foot of rental space, but before you start calculating a budget based on this figure, you need to know which other expenses may be included in the rental rate. (Shopping centers sometimes also charge a percentage of gross sales in addition to maintenance fees and the basic price per square foot.)
  • Online zoning maps aren't always current, so once you find a good site that is labeled as commercial, check with city hall to make sure the zone hasn't been changed.
  • Check for contract restrictions in the lease since some shopping centers and towns limit the number of restaurants, cafes or other businesses that can be near one another.
  • All contracts are negotiable. It never hurts to ask for changes, such as when you want to alter the space or sublet to other vendors.
  • Make sure the lease isn't too long (in case you decide to sell your business) or too short (because you need time to establish a presence). Lease terms of three, five or 10 years are typical, but you can negotiate for a shorter lease with a longer "option for renewal" period.
  • Include a cap increase limit — 5 percent is typical — so that you can plan for rent increases and not get priced out of your space.
  • Insist on a bailout clause so that you're not stuck in the lease if sales don't meet a predetermined amount or an anchor store that draws customers leaves the area.
  • When starting a franchise, the parent company might assist you in finding a good location. The company might also insist on holding the lease, depending on your contract with them.

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