10 Things to Consider When Leasing Retail Space

We compiled a list of what we think are the ten most important criteria to consider when retail leasing for your business.

1. Rent

OK, the first one is pretty obvious. Being able to keep your doors open will largely depend on whether you can afford your monthly rent, so when searching and comparing properties, focus on locations with rental rates that fit your budget. Also, don't forget to take into account the annual increase of your rent, which usually kicks in at the beginning of each consecutive lease year during your lease term.

2. Operating Expenses/CAM

CAM is the second largest expense associated with retail leasing. Even if one property offers lower rents, it may end up being costlier on a monthly basis depending on its CAM charges. The best thing to do, is to add your rental rate and the operating expenses rate, then compare properties based on this cumulative monthly expense.

3. Demographics

"If you build it, they will come." Not true. When it comes to demographic data, you need to look at the total population, the number of households, and the average household income within 1, 3 and 5 mile radii. These are the three most valuable statistics to consider when determining whether there are enough people nearby to support your business and if they can afford shopping with you.

4. Traffic

In retail leasing, traffic counts and patterns can also make or break your business. The higher the traffic count near your store, the more potential customers you are going to be exposed to. Another important traffic related issue to consider is whether the entrances/exits to the property are at a signalized intersection. People tend to avoid places that are hard to get to. Last but not least, you need to consider whether you are on the "right side" of the street. Depending on your business, you may want to be more conveniently located "on the way home" or "on the way to work."

5. Signage

Signage is crucial in identifying your business location; without it your store will be very hard to spot. Building fascia and pylon signs are the two most popular types of signage offered by landlords in retail leasing, however not every tenant is offered a spot on the pylon.

6. Tenant Mix

When it comes to leasing retail space, you want to be in the "right" company. Properties with businesses that attract similar clientele will most likely bring more foot traffic to your doors as well. Are there any "anchor" stores? As the term implies, grocery stores and larger retailers attract and keep shoppers longer on the property, which is beneficial to the smaller tenants as well.

7. Competition

Areas with fewer competing businesses will obviously give you a higher market share and more customers. This is especially crucial when you first open your store as this is the time to build a solid and loyal customer base. In addition, you need to request an exclusive clause in your lease, meaning your landlord will not lease stores to any other companies that are in the same business as you.

8. Parking

Sufficient and convenient parking is also important in ensuring your customers will keep coming back. As a general rule in multi-tenanted properties, each tenant is allotted parking spots based on the ratio of a particular number of parking spots per 1,000 leased square feet (ex. 4 spots per 1,000 sq. ft). Depending on the type of business, landlords sometimes offer dedicated parking as well.

9. Concessions

Depending on factors such as economic conditions and the amount of vacant space in the market, landlords may offer different concessions to sweeten the deal. Free rent and tenant improvement allowance are the two most popular in retail leasing.

10. Landlord and Property Manager Reputation

You negotiated and signed an awesome 5 year lease. Three months later, your roof is leaking and no one is answering the phone at the landlord's office. Now what? When leasing retail space, also take note of the landlord and property management company and take some time to research their reputation. Neighboring tenants in the property as well as other real estate professionals may be willing to share their experiences, both positive and negative. And of course, there is always Google.