When determining what real estate space is best going to bring customers in the door, there’s a lot more to think about than square footage. There are many details that can make or break a small business, so it’s important to keep them in mind when you’re getting any retail or restaurant space off the ground. We asked Adam Conviser, principal at Conviser Property Group, about what to consider when negotiating a property lease. Here’s what he’s learned during his 20 years in commercial real estate.
- Understand your customer
Conviser often finds that business owners can benefit from a sit-down brainstorm on who their customer really is. Are they raising families? Shopping in the morning? Do they drive or walk? The answers to these questions can help you choose a location that will make it easy for those customers to reach you.
For business owners struggling to figure out who their customer base is, Conviser has a tip. Ask yourself: Where else do your target customers shop? Are there other stores that will be a good generator for your business? Not only can those stores drive traffic to you, but following their lead can help you figure out who your customer is and where to find them.
- Your neighbors say a lot about your brand
That leads right into the next important point: a storefront does not exist in isolation. The businesses around it give customers cues that establish who you are as a brand.
“If you’re next to a high-end coffee shop, that drives a different customer and sends a different message than if you’re next to a big chain,” says Conviser. Pick your neighbors wisely and understand the high value their brand halo can add to the square footage you’re renting nearby.
- Parking is key
The intersection of time and space required to figure out the parking needs of your future customers might require a PhD in physics. (Or at least top-notch excel spreadsheet skills and a great commercial real estate broker.) Questions to ask include: How long will customers need to park for? How many turns will it take them to get out? Do you have to accommodate pedestrian traffic, too? If the parking lot is shared, don’t forget to look at the other tenants and consider how their customers’ parking needs will affect yours.
“You could have a center that’s light on parking,” says Conviser, “or other tenants are heavy on parking in the morning, but you don’t need parking until the afternoon.” Of course, keep in mind that you can’t control turnover and the next tenant may have very different parking patterns. One tactic Conviser recommends is to negotiate the rights to exclusive parking spots for your customers, or short-term parking directly in front of the retail space.
- How is the space being delivered?
“Not all spaces are equal,” Conviser warns. Some spaces get rented out sans heating or air conditioning or even without an electric panel—a condition Conviser and his colleagues call “a cold dark shell.” The costs of preparing that space can add up quickly, so don’t necessarily drop everything for a lower sticker price. The opposite side of the spectrum is a warm, ready-to-open atmosphere called a “vanilla shell.”
If you’re opting for a cold shell, consider what it will cost to get it open, and negotiate with the landlord for things a month of free rent or a tenant improvement allowance to offset your costs.
- Leverage your brand
If you already have a well-loved brand, or even just a strong concept that’s likely to bring new customers into the area, factor that into your negotiations. Conviser cites The Darling Bakery Café, now with five locations. An adored business like that brings big benefits to landlords by luring more customers to the neighborhood or building. A landlord with multiple retail spaces will be hungry to lock in a tenant like that, and might lower the rent, so know the value your business is bringing.
- Negotiate for exclusivity
This one is vital in a multi-tenant scenario, says Conviser. If you’re a coffee shop in a shopping center that has 10 spaces, another coffee joint moving in to compete with you can be lethal.
“You want to negotiate that the landlord will not lease to a direct competitor,” says Conviser. This is where experience and savvy can come in if, say, a restaurant wants to sign a lease and sell coffee after dinner. “You start having to craft language like: ‘the coffee shop has the exclusive right to espresso and espresso-based drinks on anything under 5,000 square feet,” he says.
In a complex scenario like that, an experienced broker can engage a landlord to carve out an agreement that protects your business.
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