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How to Find a Retail Store for Rent (part 2)

How to Find a Retail Store for Rent (part 2)

When looking for a retail store for rent, Starbucks pays careful attention to access, visibility, co-tenancy, and other critical factors. Smaller entrepreneurs should do the same—whether a beginner looking to open his or her first store or restaurant, or an experienced franchisee aiming for unit growth in a new territory.

The wrinkle here: Independent and franchise operators need to spend most of their time on day-to-day concerns associated with running their business; they can’t afford to maintain in-house departments focused on the subtleties of retail real estate site selection.

As a result, many entrepreneurs may not be aware of seemingly small details that can make all the difference in the traffic and sales of a new restaurant or store.

That’s where brokers come in. At Equity Retail Brokers, we routinely advise both local entrepreneurs and national operators on important trends in the markets we serve. It’s our job to track and analyze these factors, right down to specific ZIP codes, shopping centers, and storefronts, on behalf of our clients.

If you’re looking for a retail store for rent, here are some key considerations.

Understanding Location, Visibility, and Access in Retail

We mentioned the way that entrepreneurs tend to focus on operational fundamentals. It’s absolutely the right thing to do. By forging ties with local sports teams, schools, and other community organizations, investing in social media and other digital channels, and hiring positive, service-oriented associates, you can position your new retail store or restaurant for robust growth. First, though, you have to find the right retail store for rent.

Work with a professional retail broker to answer the following questions:
  • How visible is it to passing shoppers? Drive that main artery and see for yourself whether that prospective storefront has high visibility. Be wary of those that are difficult or impossible to see due to obscuring buildings, trees or billboards, or are angled away from that roadway.
  • Is the shopping center busy, with traffic-driving anchors like Wegmans, Giant Food, The Home Depot or Target? If not, it isn’t necessarily a deal-breaker, depending on your retail or restaurant concept. But make sure to huddle with your broker about how co-tenants could affect your prospects in that space (more on co-tenancy below).
  • How important are convenience and ease of access to that location? If it’s a high-traffic site, great. Even if the shopping center is on a busy roadway, remember that this is only one data point. It takes a trained eye to recognize truly favorable shopping center access. If it’s difficult—or in extreme cases, dangerous and scary—to get in and out of a property, this can undermine foot traffic and sales at the property.

Co-tenancy in Finding a Retail Store to Rent

If you’re a newcomer to retail real estate, part of the learning curve is understanding some of the jargon that is in common use—terms like “co-tenancy clause” or “cotenants.” What are cotenants in retail? What is a co-tenancy clause?

It’s pretty simple: Cotenants are just the other businesses at that shopping center; co-tenancy clauses are written into many retail leases. When your broker and attorney succeed in getting you a co-tenancy clause, the landlord will be legally required to lower your rent or offer you other favorable terms if certain of those aforementioned, traffic-driving tenants happen to “go dark,” or close up shop when your lease is still in effect. In some cases, you may even be able to terminate your lease.

Understanding how tenant mix can affect a new retail store or restaurant is extremely important and, again, takes expertise. If you’re running an Apple store, for example, you want to be in the very best “A” properties with the highest traffic, visibility, and sales per square foot.

While the attractive rents at a lower-tier property could tempt you, it would be a huge mistake to put your blue-chip concept next to low-grade “B” and “C” tenants. A broker can help you understand the right tenant mix for you.

Remember, too, that figuring out co-tenancy at a shopping center isn’t as simple as looking at who’s there today. Brokers talk to landlords in the markets they serve each and every day. That means they have the inside track on unannounced deals—the retailers and restaurants that will be coming and going at specific shopping centers.

The Economics of Leasing Retail Storefronts

When house-hunting, you have plenty of resources at your disposal to figure out whether the asking price is above or below the market.

For those looking to find a retail store for rent, the calculus is more complex. Professional retail brokers know the landlords and going rental rates across the markets they serve. That means they can provide insight into your prospects for winning this or that desired deal term. “She has been very flexible in the past on granting some co-tenancy clauses to businesses like yours,” your broker might tell you. “On the other hand, while we will certainly try, it’s unlikely you’ll get a very generous tenant improvement allowance from this landlord, based on what we’ve seen in past deals.”

That kind of inside knowledge is important—it gives you a way to get that store open quickly, with the best possible economics. After all, speed to market is essential in retail: Take too long, and your competitor could swoop in and take the space you wanted.

Lastly, you may not be aware of everything that goes into the economics of the deal. Let’s say you’re doing a triple-net lease, which is very common in retail real estate. In addition to base rent, a broker can help you understand the different expenses for which you’ll be responsible in that agreement—things like real estate taxes and common area maintenance (CAM) charges—as well as the costs you can expect for buildout, permits, legal fees and more.

When you’re in the process of finding a retail store for rent, you want to move forward with a “no surprises” approach to your plan and budget. Contact Equity Retail Brokers to hit the ground running with a competitive edge.