Finding the perfect property for your store is a significant business decision – it will be the real-world face of your brand. Whether you’re setting up your first brick-and-mortar store, or expanding, there are certain considerations you need to be clued up on when undertaking your search.
Completely Retail is UK’s leading retail property portal, listing over 13,000 vacant retail spaces in the UK and growing, so it is a great place to start.
Crucial factors to consider when selecting prospective retail spaces:
- Budget and costs
- Lease type
1. Establish your budget and consider the costs
Before looking into potential properties, establish how much you can afford. Budgeting should be a key aspect of your business plan.
Be conservative with your budget, as there will likely be additional unexpected costs that crop up when running your store, and it is better to be prepared for this.
The primary expense will be rent, and whilst it is impossible to predict the exact price before finding a suitable property, looking at the average price in your preferred area will give you a good idea. Currently, London is the most expensive place in the UK to set up a shop, with other major cities such as Manchester, Birmingham, Cardiff and Leeds also in the top ten.
It is also important to factor in rent reviews when budgeting long-term, which are typically carried out every 3-5 years. Prices can increase and decrease over time, depending on a multitude of factors, but prepare for your rent to increase just in case.
Business rates are another cost to factor into your budget. This is a tax on non-domestic properties, that are calculated using the property’s rateable value (i.e., their estimated value on the open market). Check whether your business is eligible for small business rate relief – a significant discount for businesses with a rateable value of £15,000 or less.
Other hidden costs to consider include:
- Agency fees
- Decoration, repairs and ongoing maintenance
- Building insurance
- Service charges
2. Choose your ideal location
Deciding on a location for your store early on is essential, as this will enable you to estimate your budget accurately and narrow down your search results. Consider your target demographic, competitors, transport links and local amenities.
Check out our previous post for more help choosing the right location for your retail store, including insights into geographical location, high streets vs. shopping centres, and using competition to your advantage.
3. Determine how much space you need
Whilst it is vital to ensure you have sufficient space, both on the sales floor and in the stock area, you do not want to be paying for surplus space.
Tip: If you are unsure how much space you will need, and have an idea of your sales goals, you can use this formula to estimate the required size of your sales floor:
Gross Sales Volume ÷ Sales per Square Foot = Size of Selling Space
In addition to the sales floor, consider what other rooms you will need to accommodate, such as offices, employee spaces or fitting rooms.
If the goal of your store is to increase brand awareness and e-commerce sales, you could consider reducing your space requirements by creating a showroom experience. Instead of displaying vast amounts of stock on the sales floor, customers would have the opportunity to browse your best sellers and purchase goods online via in-store tablets.
4. Evaluate your lease
Once you have narrowed down your search using your budget, location and size, you should have a shortlist of available properties that would suit your business. So, what next?
Upon viewing and selecting your ideal retail property, it is crucial to understand what type of lease is being offered, and what clauses it involves, as your lease type will determine which costs you and your landlord are responsible for respectively.
In many cases, you may be offered a Full Repairing and Insuring Lease (FRI), which means you are liable for all repairs to the property. In this instance, ensure the property is in good condition before signing anything.
If concerned or unsure, commission a structural survey to double-check everything. This will likely incur an additional cost of approx. £1000, which will be worth it if it saves you money in the long run. If the survey reveals structural issues, make sure the landlord agrees to fix these or exclude them from your liability.
Alternatively, you may be offered an Internal Repairing Lease,whereby the landlord is responsible for structural and external repairs. These sometimes come with a service charge (e.g., in shopping centre units), which you would have to pay on a monthly or quarterly basis, so factor this into your budget if you are considering a property with this lease type.
Within these two main lease types, you as the tenant may or may not also be responsible for a variety of additional costs such as utilities, property tax and building insurance. Understanding your lease before signing is vital, so consult a property lawyer for a professional review if you are unsure about anything.
Rather than signing a lease for 3+ years, you may be considering a short-term lease or licence agreement to experiment with physical retail, or test a new product or location with a pop-up store. If this is the case, check out properties available for short-term leasing on Completely Flexible, and sign up to Soapbox to be alerted to suitable properties which meet your requirements.
Take your time
Whilst this list is by no means exhaustive, it has hopefully given you a good idea of the types of factors to consider when searching for retail property.
Choosing a property for your business is not an easy decision and not one to be taken lightly, but with sufficient planning time and knowing which questions to ask, you should be able to close an excellent deal and set up shop in a property that meets all your requirements.