It’s a tenant’s market when it comes to commercial real estate, but it won’t always be that way. According to the Urban Land Institute, recovery in the commercial real estate industry has begun, and will continue into 2013. Leasing, rents and pricing will rise, and the excess of available retail space will begin to decrease. That means that this is one of the best times in history to sign a commercial lease. As the owner of Pigtails & Crewcuts, which has more than 30 locations nationwide, and as the former senior vice president of Heavenly Ham, which had more than 200 locations in the United States before it was sold in 2002, I have advised hundreds of business owners on how to find the best retail space. And I’m telling you, now is the time to do it.
We are seeing rock-bottom prices, incentive packages and a willingness to negotiate like we’ve never seen in the leasing market. Despite those deals, it’s important for business owners to not be impulsive. The key to a successful lease in commercial real estate is research and negotiation. The lease you sign will have the power to make or break your business, so give it the time and attention it deserves.
Here are 10 tips on how to find the ideal retail space in the commercial real estate market.
- Location, location, location. To find the perfect location, business owners need to understand who their clients are and where they shop. Try and get into their head and approach each space through their point of view. Are you an impulse business? If so, you could benefit from being in a high-traffic area, where your store can continually market itself to passersby.
- Parking, parking, parking. Do not underestimate the value of available parking.
- Find a realtor that represents you—not him or herself. You want someone who is going to listen to what you’re looking for and show you all the listings that fit. Not just his or her own listings.
- Be honest with yourself about your business. Are you offering such a unique and sought after service that your customers will be willing to drive out of their way for it? If not, find a place centrally located where inconvenience can’t be a viable excuse.
- Know your demographics. You can learn a lot by using the resources on the Internet to find out the average income in an area, average cost of homes, nearby school districts, crime rate and more. You’ll want to open your business in a community that is filled with both customers and potential employees. Check with the local chamber of commerce to get a feel for the area’s business climate.
- Determine the best fit. Do you think your business will succeed better in a neighborhood center or a shopping mall? What about a small, local center? Would it be better off as a free-standing building? Is the community a good fit with your brand’s image? Find out where successful competitors are located to validate your decision.
- Understand your design needs going into it. Will you want a lot of window space, or limited? What are your ceiling requirements? What’s a realistic range when it comes to square footage? What are your door requirements? How about bathroom? Arm yourself with all of this information in the beginning so you don’t need costly renovations down the line.
- When looking at spaces, scrutinize what’s there and what’s missing. All spaces are going to have warts. The key is to find the spot with the fewest. For every space you look at, make a pros and cons list. Note things like proximity to complementary businesses, condition of the space—is it first generation or second?—and estimated construction costs.
- Know your zoning. Be certain that you will be able to legally operate your business in this location.
- Level with your landlord. Before you even start thinking about officially negotiating a lease, find out if the landlord is willing to play ball. Would he or she be open to lowering the rent (or giving you a month or more of free rent), including a tenant allowance, paying for parts of the build-out and offering other incentives? If not, maybe you’ll find another landlord who will.