Renting retail spaces is among the many expenses of operating a small or medium-sized company. Planning for rental costs will help you avoid unnecessary financial stress.
Before deciding where to open your store, are many steps you need to take to ensure a smooth process.
If you want to know exactly what you’re paying for, talk to landlords about potential spaces you’d like to rent for your new business.
Find Average Monthly Rents Near You
To determine the average monthly rent for a retail space near you, take the average price per square footage and multiply it by the total square footage you want.
In Seattle, you could get an average commercial price per square footage of $36. Let’s assume you’re a small fashion company that needs roughly 1,000 square meters of retail space.
Multiply 36 by 1,000 to get 36,000.
To find the monthly rent cost, divide 36,000 by 12 (36000/12). The 12 represents the number of months per year. That equals $3,000 a month.
By calculating the average price per square foot, your rent in Seattle might cost about $3K per month.
You can also team up with a broker or agent who can help you find great deals for retail spaces for rent with the characteristics and prices you want.
Do Your Due Diligence on Your Lease Terms Before Signing
Rent will be the most significant expense for your business. However, keep an eye out for terms that may add additional costs when looking at space.
An example of a triple-net lease is when an apartment listing says “NNN.”
Triple-net leases mean landlords will collect tenants’ rent plus tax, insurance, and property management fees. These additional charges significantly increase the cost of commercial real estate.
NNN fees aren’t significant, but they’re not insignificant either. Along with other costs, you’ll pay a higher rent price than the basic one.
Commercial leases include:
- Full-service or gross lease: Includes utilities, taxes, insurance, and costs that are bundled together for you.
- Single Net Lease: Landlords pass on property taxes.
- A double-net lease: Allows landlords to pass on taxes and insurance costs to tenants.
- A modified net-leased property: You negotiate expenses passed on by the landlord.
There are other costs are associated with furnishing and maintaining your retail space.
You Need to Furnish Your Retail Space and Account for Utilities
Restaurants need furniture, fixtures, equipment, and utilities like any business. However, for restaurants, these items can be expensive.
Make sure to include estimates for utility and equipment expenses in your budget.
Have Extra Cash on Hand
As you would for your personal finances, keeping an adequate cash reserve for your business will help you avoid compromising your monthly expenses.
Additions to Your Retail Space
Consider adding additional office space, windows, or other structural modifications. If you’re considering making any future structural adjustments, talk to potential landlords or look into lease agreements to see if the available space can accommodate you.
Also read: How to choose The Perfect Domain Name
Think About The Lease Expiration Date
You can get out of your lease if there are financial difficulties or other issues. But, states vary in their protection for tenants who want to leave before the end of the lease term.
Beforehand, please talk with the building owner (landlord) about how they would like to handle your tenancy after expiration. If terms remain the same, there might be space for negotiations.
More Expensive Manufacturing Costs and Supply Chain Shortages
Supply chain disruptions due to the coronavirus pandemic and political disputes between countries have increased the prices of specific raw material inputs used by manufacturers.
These inputs include plastic and metal components found in thousands of everyday items.
Business owners risk losing their businesses due to these shortages and interruptions. They might need help to meet the demands, and the products they’ve offered could cost them more than ever. In addition, paying rent can become a challenge.
If your business fails, you’re still on the hook for outstanding debts.
You may be working hard to increase your business, but things outside your control can affect your operations.
Keep this in mind when looking for retail space: Some landlords will allow or even encourage you to sublease their space.
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