Looking for commercial real estate can be overwhelming for a first-time business owner. You need a space that will bring in traffic, but will not bust your budget. Once you find your perfect storefront, you have to negotiate a lease.
Finding the Perfect Spot
Who is your customer? Is your item an impulse buy? Or are you a destination store? You cannot find your ideal retail space without knowing your customer and how they think.
Once you know who you are selling to, you can start looking for the perfect location. Commercial real estate brokers are an excellent resource. They have information on the demographics of the area and the foot traffic. They can also help with your lease negotiations.
Understanding The Lease
Leases are legal documents. As a small business, you will most likely sign the standard lease form of the property manager. This lease is written to benefit the property manager, not you. You should have a lawyer to review the lease and explain all the terms of the agreement. Here are some key lease terms:
Base Rent: This is the minimum rent payment. It covers the rent for your space. There will be additional rent outlined in the lease.
CAM: CAM stands for Common Area Maintenance. The lease may either require a CAM contribution or payment of pro-rata share of actual CAM expenses. The lease will also detail which expenses are included in CAM. If you are paying pro-rata share, you will receive an annual statement from the property manager of actual expenses.
Gross Rent: A single rent payment that includes base rent and CAM.
Marketing Fee: Some shopping centers require tenants to pay a marketing fee. The fee is to cover marketing expenses for the center, but most leases do not require the property manager to detail how they spend the fee.
Percentage Rent: Percentage rent is rent paid on a percentage of sales. Some leases require percentage rent in addition to base rent after your store passes a specific sales volume. Other leases have percentage rent instead of base rent. For a new operation, this type of lease can help while they grow their customer base because it makes rent a variable expense.
These are just a few issues to keep in mind while you start looking for your storefront. It’s important to have professional resources such as a commercial broker and lawyer that you trust and can help you navigate the lease negotiations. Make sure that any promises made during lease negotiations are included in the lease document.
Do you have any other questions about leasing commercial space? Do you have any advice for a new business owner?