Settling Into Your New Retail Space

The big day has finally arrived. You have moved into your retail space. It’s everything you ever dreamed of… or is it? Suddenly the glitz and fun of opening your own retail store can become very overwhelming due to the seemingly endless list of “to do’s”. Just when you think you have checked everything off comes another “something” that must be done. To help smooth the often challenging task of deciding what to do next, there are 5 D’s to consider:

1. Distinguish immediate deadlines that must be met to ensure a functioning retail space. This includes getting electricity, internet, cable, gas and so forth all set up as well as tracking when product shipments are schedule to arrive (assuming orders have been placed). If you can, set up online paying so that fixed bills are paid on time and without hassle so that can spend your time focusing on more important retail issues.
2. Define a designated inventory area. Whether this is behind the scenes in a backroom or within storage space of floor displays, make sure you have an organized inventory plan so that you can put things away as you go. Think about how your customers may shop when doing this so that if you need to pull extra sizes or extra inventory you can easily do this while still monitoring your retail space.
3. Decide on where the largest fixtures and displays will be. Your cash wrap is a focal point, so this may be the first thing you should decide on. Consider where you will be when customers aren’t in the store, such as at your computer, and make sure you can see the front door if possible at all times. This is both safe and allows for you to greet your customers with a friendly, prompt hello.
4. Determine what your merchandising strategy will be. Make sure to focus on product and price points when planning this, allowing for featured items to be easily seen by customers while also considering what products will be first viewed by potential consumers. Depending on your store, price points will matter (particularly in this economy) so balancing the front of your store with a variety of price points may attract more customers.
5. Decorate as you go with both style and purpose. Need a dressing room? Make it roomy yet cozy while adding some extra touches to help bring style to this necessary space. Want to offer a lounge area for guests of customers to relax? Great idea, just make sure it’s not out of place with your overall store layout. Need some mirrors? Must retail stores do, so think about where they will make sense for your customers to use them.

This is an exciting time and what you do now will help shape the overall foundation of your retail success. Remember to be flexible with your plans and accept changes as you go. Your customers will help make your store what it will become, so embrace this! And of course, enjoy!

Written by Nicole Leinbach Reyhle, this article was first published on www.Nolcha.com.

 

Retail Recruiters Work To Lower Vacancy Rates In Downtown Districts

Keeping an interesting, attractive mix of retail tenants has always been the goal of downtown business alliances, chambers of commerce, and commercial property brokers and owners. By offering low vacancy rates, these groups can drive consumer traffic and keep sales revenues up—all key ingredients in ensuring an economically sound downtown district. But with the recent economic downturn and closures of big box retailers like Borders and Blockbuster, retail vacancies are posing a real problem for Main Street USA.

To combat this issue, a new set of experts are popping up around the country to assist in filling the vacancies by courting small business owners, explaining why their downtown is a good fit and setting them up with an ideal retail location. Business alliances that represent the interests of property owners and retailers are hiring retail recruiters to act as “matchmakers” for local commercial property owners, brokers and potential retail tenants. Downtown districts are recognizing that by hiring retail recruiters, they’re actually jumpstarting the local economy through proactive recruiting methods.

One such program is located in Downtown Highland Park, Illinois, a northern suburb of Chicago. The Downtown Highland Park Alliance hired Angela Shaffer as their retail recruiter in June 2010 to proactively address vacancy rates and bring in new retailers that add to the interesting, attractive mix of tenants. Her job is to seek out potential new merchants and act as a “cheerleader” for the community. In addition to showing business owners the vacant locations that would be a good fit for their businesses, she showcases several reasons why they should locate in Downtown Highland Park above other communities.

Within one year, Angela has made in-store visits to approximately 400 businesses in 25 communities in Illinois. She has assisted in placing four businesses with leases in Downtown Highland Park, and has one in negotiations at the moment. There are 15 active prospects considering specific locations in the downtown area, some who have already been in touch with the respective property owner. To date, she has made over 200 specific property referrals. Two businesses Angela has helped place in Downtown Highland Park are opening in the spring: Sweet Bites, a cupcakery, and ArrivaDolce Gelato and Coffee Bar.

In general, though the economy is tough for retailers, Downtown Highland Park is still seeing a flurry of activity. In March alone, Angela conducted four tours, one resulting in a lease negotiation. There is great momentum happening in town. The east side is booming, the west side has new businesses preparing to open, and she expects to see some great activity in the months to come. It’s exciting!

“I have an entrepreneurial background, so I understand the needs that business owners have when searching for a retail location,” says Shaffer. “Our retail recruiting program is an advantage to Downtown Highland Park—we’re finding that we’re able to reach more prospective merchants and introduce them to our community. Plus, we’re offering a benefit to these business owners, because we are an unbiased source in terms of property location—we show potential tenants all of the vacant spaces that meet their criteria in our downtown district and help them understand the market. We want them to succeed in the long run in our downtown, so we’re going to work our hardest on their behalf.”

One of the best advantages to business owners is that retail recruiters are generally staffed through their downtown business alliance, so this is a service they receive free of charge.

Retail recruiting programs such as the one in Downtown Highland Park are becoming a nationwide trend to proactively offset the negative effect the economic downturn had on downtown districts. Retail recruiters are certainly a growing trend nationally. One consultancy noted that they have created 17 retail recruiter programs across the country in large and mid-size cities, including new programs in Detroit and Seattle. This is good news for business owners seeking a new location as well as any stakeholders concerned about vacancy rates—retail recruiters are creating a win-win situation for everyone!

Angela’s advice to business owners seeking a retail location in a downtown district is to contact their business alliance and find out if a retail recruiter is available to assist them. They will conduct plenty of research on behalf of business owners, filling them in on the benefits of setting up shop in the community and helping them determine a location that is the best fit for their business needs. Best of all, they’re providing a resource at no cost.

By addressing vacancy rates, empowering small business owners and encouraging shopping locally, Angela and the Downtown Highland Park Alliance believe retail recruiters are a necessity to help today’s downtown districts thrive.

Contributed by Bridget Kagan, who is the Marketing Coordinator for the Downtown Highland Park Central Business District Alliance in Illinois. For more information on the Downtown Highland Park Alliance, visit www.downtownhp.com.

 

What You Need To Know About Leasing A Store

So you own your own retail business, excellent!  Aside from the “4 P’s” of marketing, there is another acronym that is ultra important to the success of any retailer, “The 3 L’s”…..Location, Location, Location!  Let’s take a look at some critical pieces of information you will need to know in order to be successful at taking your retail business from your garage to Main Street, USA. 

Important First Steps

[tweetmeme]An important step in being able to strategically locate your business in any retail environment, is knowing who your clientele is.  Once you have identified that, then you are ready to begin your search for leasing retail space. 

So now that you know what demographic you intend to market towards, what are some of the keys to successfully leasing your first retail space?  Use of a professional Broker could be very helpful since more than likely, that Broker knows the Landlord and/or the Broker who is representing the Landlord on a piece of property that you may be interested in.  Your Broker also acts as the “buffer” between you and the Landlord during the negotiating period, which he or she can implement “tricks of the trade” to ultimately get you the best possible deal.

The “In’s and Out’s” of Leasing Your Store

Let’s look at the “in’s and out’s” of how to successfully lease your first retail store:

The first thing that you should do is get in your car and drive an area looking for vacant spaces in shopping centers.  When you drive your target area, look for the following:

 -          “For Lease” signs in windows or board signs in the grass area.  That’s your starting point for getting all the necessary information that is available.

-          Look at the co-tenants in the shopping center.  Are they complimentary uses to yours? 

 Once you have identified a site, or multiple sites of interest, you should then call the Landlord or Listing Broker to obtain all information like asking price per square foot, size of the available store, and set up a showing so that you can view the interior of the space.  Keep in mind a few things:

 -          Does the frontage (the number of feet of window space you have open to the street) provide enough visibility to the road?  Is there enough depth to the space?

-          Is the bathroom strategically located in a spot that will not take up valuable floor or storage space?

-          Is the ceiling in good shape?

-          What is the age of the heating and air conditioning unit?

-          What are the 1-3-5 mile radius demographics?

-          What are the traffic counts at the intersection of the roads at the property?

-          What is the access in and out of the property from the streets?

-          Is there pylon signage available to you?

-          Is there plenty of parking available to you?

Let The Negotiating Begin

So you have now viewed each space and selected the one location you want, what’s next on the agenda?  Traditionally speaking, you will begin negotiations via a Letter of Intent (“LOI”).  An LOI is a non-binding, which means that you are not legally obligated to rent the space even if you sign the LOI, agreement that depicts the terms of the deal.  It essentially lists who the Tenant is, who the Landlord is, the premises you will be renting, the term of the lease in years, any options to renew your lease, the base rent you will be paying, the expenses of the shopping center, any free rent you will get in order to build out your store, the security deposit, and Lease Guarantors.  This is your opportunity to negotiate!  Keep in mind that most of these points are negotiable, such as the asking base rent, the security deposit, and base rent abatement rent period.

Once you have had all the back and forth’s with the Landlord or the Landlord’s representative, a Lease will be drafted based on the terms and conditions you negotiated in this LOI.  Landlords will require you as the Tenant, to provide them with a Personal Financial Statement so that they can assess the viability of you as a Guarantor of the lease as well as the viability of you being able to pay the rent.  Additionally, the Landlord or its Agent will run a credit check on you.  If you are married, your spouse may be required to sign the Guarantee as well since assets are typically joint when married.

What does a Personal Guarantee mean?  Essentially it is a promise from the Tenant to the Landlord that IF you default on the Lease, close the business, but still have term left on your lease, that you will continue the payment of rent to the Landlord until the space is either subleased or leased to a brand new Tenant.  In the event of a default on the Lease, such as non-payment of rent, the Landlord has the ability to gain a legal judgment against you for any outstanding rent owed.  This is a very critical topic, so discussion with an attorney on this matter once you get the lease to ensure awareness of what you are signing is important.

Moving forward, you now have a lease draft in your possession, what do you do with it?  Unlike the LOI, a lease is a binding agreement.  Once you sign this lease, you are bound to it for the terms and conditions you agree to.  Therefore, the use of an attorney to negotiate the legal aspect of the lease would be a wise investment, but don’t use bad form and have your attorney try to renegotiate business terms, Landlords don’t like nor appreciate that.  Typically speaking, commercial leases are more favored towards the Landlord and protect them, which is why the expertise of an attorney is needed in order to make the lease fair between the parties. 

Types Of Leases

So what types of leases are there?  There are gross leases, modified gross leases, and triple net leases.  Most commonly used are the triple net leases.  A triple net lease means that you, the Tenant, are responsible for basically everything.  You will have two rents that will make up into one.  You will have your base rent, which is more commonly known as fixed minimum rent, and then additional rent of the expenses of the shopping center: real estate taxes, common area maintenance, and shopping center insurances.  You will also be responsible for maintenance, repair, and replacement of your heating and air conditioning units.

Typically speaking, your base rent will increase by 3% annually, unless you negotiate an alternative with the Landlord.  However, the unknown is what the expenses will do each year.  It is rare that expenses decrease from one year to another, but not impossible to occur. 

As part of your LOI negotiations, a Landlord may offer you 30 days of free base rent.  As a start up business, a Landlord will more than likely have you take Possession of the Premises in an “As Is” condition.  You will have to do any demolition of the space as well as the build out.  Now, general building code issues that are not related to the type of business you will be opening, should be handled and corrected (if need be) by the Landlord.  You will still be required to pay the expenses of the shopping center during that base rent abatement period, however. 

So there you have it!  A general glance at what to look for and expect when you make that leap from your business out of your garage to Main Street! 

Copyright © Jason Lenhoff: Jason Lenhoff has been a commercial real estate broker for Horizon Realty Services, Inc. since 2000.  Horizon Realty Services is a full service commercial real estate company specializing in retail shopping center leasing/sales, tenant representation, construction, development, and shopping center management.  Specifically, Jason Lenhoff specializes in leasing shopping center space as well as tenant representation.  For more information on Horizon Realty Services, Inc. please visit our website at www.horizonrealtyservices.com or email Jason Lenhoff at jlenhoff@horizonrealtyservices.com.

Negotiating Leases for Commerical Space

Do you sign a lease or don’t you? Do you renew yours or shut your doors? With so many vacant commerical properties available and more and more business owners suffering from the recession, retailers are struggling with what to do regarding their rental business space.

As small business owners, it is imperative to have a retail space that will allow for customers to get to you easily and ideally allow for walk in traffic, as well. But paying for a premium retail location can be pricey. There are less customers but your rent is still the same. As a result, retailers are wondering – do they sign another contract when their current one expires or move out?

To Renew or Not To Renew – That Is The Question

Landlords get it. They may not like it, but they get. They know that business is tough, consumers are spending less and as a result, small business owners are making less, as well. If you are good tenant with a positive history of paying your rent on time, respecting your space and offer a great store within the space, chances are your landlord would be open to a discussion of renewing your lease on a less expensive scale. If you are comfortable sharing your numbers, let them know what business was and now is so that they can see the difference. Or at least give them percentages to review. Another thought? Consider a month to month contract with the option of three months till you need to be out if they should find a new tenant or you should need to shut your doors. While this scenario may not be ideal, it’s more ideal than an empty store front that has no tenants and no business for your local community. At the very least, have a conversation with your landlord if your lease is about to expire regarding what you can do to stay afloat.

Signing A Lease In A Recession

So you want to start a new business in the mist of struggling businesses everywhere? Good for you! I love that go-get-them attitude! Of course, I am sure you will be pinching pennies where you can, so make sure that getting a great rental space is among those places. Landlords know too well that empty store fronts don’t make money for anyone. A year of nothing in a space is a lot less money than a year of 20% less than what they are asking per month. Consider the location, the local market and your options. Talk with potential landlords about shorter leases (afterall, no one knows what the success will be of their businesses) and cheaper rent. It’s worth the conversation. Make that conversations – talk to a few landlords and consider a few options before closing the deal to ensure you are getting the best available space and rent out there.

Finally – you need to pay your rent, your business expeneses, and hopefully yourself, as well. Don’t let bully landlords get in the way of this. There are smart, willing to work with you landlords out there that “get it” and want to see you succeed. Like it or not, the recession has opened the door for conversations we may not be use to, but unfortunately the recession won’t be over tomorrow so it’s time to start getting use to these new conversations.