Leasing a Retail Unit

Bits_n_Bobs

I have half an inkling of an idea for a business, however it would entail a leasing a retail unit - something I have not done in the past.

At this stage I am only trying to get rough back of the envelope figures on the idea to see if its worth pursuing at all, but checking the costs quoted on daft for retail units in and around south county Dublin (not Dundrum shopping center) they seem very very steep?

I assume the quoted figures include some wriggle room for negotiation - would you be looking at 10/20/30 or what percent on this?

Also can I reasonably expect the estate agent to supply me with the relevant commercial rates?

infamous

Hi Bitsnbobs,

There is definatly room to negotiate theres no fixed reduction it depends on the demand in the particualr area. I know you will pick up a retail unit of around 800sg feet in blackrock or Dun Laoighree for around 18k pa. The estate agent will let you know what the rates are, they would be in or around 5k for a property this size. Theres also room to negotiate a couple of months free rent. Best of luck

antoinolachtnai

You really need to speak to an agent about what's possible and reasonable.

The thing about retail space is that there is a big difference in footfall between a good site and an ok site. If the business depends on footfall, then it's worth paying extra to get that footfall, even if it looks very high. On the other hand, if it's a business that just needs a convenient location, but not too much footfall, you can get lower prices and better terms for a site that might only be a few hundred yards from the high-footfall site. (Terms are things like rent-free periods, break clauses, and so on and these may be as important as the rent itself.)

Bits_n_Bobs

Thanks - I had no idea it was possible to negotiate terms such as rent free periods (as opposed to the actual cost of the rent).

I had an inkling that it would be around that price i.e. 800sq ft @ €1,500 per month as an 'average' location. I assume daft is the best place to research retail units or is there another site that specialises in this?

antoinolachtnai

It really all depends. A rent free period is really a loan from the owner to your business.

Websites might be a starting point but you really need to talk to an agent.

There is a lot of talk about price but what really matters in commercial real estate is quality, ie location.

maxer68

Bits_n_Bobs wrote: »

Thanks - I had no idea it was possible to negotiate terms such as rent free periods (as opposed to the actual cost of the rent).

I had an inkling that it would be around that price i.e. 800sq ft @ €1,500 per month as an 'average' location. I assume daft is the best place to research retail units or is there another site that specialises in this?

Can I suggest that you employ an agent to negotiate on your behalf as other agents will see you don't have experience and will eat you for breakfast. - It might cost €1000, but it may save you a lot more.

Rent is primarily paid for the first 10m of depth in a store. "A" rent then the next 15m (I think) "b" rent and then the remainder.

So a 800sq ft store with a 4m frontage may cost €1500 a month, but a 1600 sq ft store with same frontage may be as little as an extra €500 a month.

Location is everything - sometimes a location will not suit others but can be perfect for your use, but alway negotiate as if you have choice of 10 locations and always suggest that the location you are negotiating is not your preffrred location but will "suffice"

Once you are taking a long lease of say 10 years, expect up to 6 months rent free and also look for break clause in year 5 & 7 (lets you walk away)

DO NOT under any circumstances sign a personal guarantee - the large retailers don't and neither should you.

Bits_n_Bobs

Thanks, will check out an agent and see whats involved. Any recommendations by PM would be appreciated.

I have zero intention of signing any sort of personal guarantee - utter madness - but thanks for the advice

Realistically whats the shortest period for a lease? I can understand landlords pushing for long term ones, however with the rate of attrition with shops over the last few years surely their expectations in regard to this has changed?

antoinolachtnai

It's not just the length of a lease, you can also have something called a 'break' clause which allows you to leave.

Now, there is a problem with short leases too. The problem is that after you have invested in and developed the business on the premises, you could end up being kicked out and replaced with another tenant in a similar line of business. Even if your business fails, the work you have invested may have contributed to the value of the property, and a strong lease can give you a way to realise some of that value. A lease can have a value, even where the previous business has failed.

Idea of employing an agent is a good one if you don't know much about commercial property.

Oasis678

how did u get on with this bits n bobs any additional advice im looking at something similiar. thanks

MyPerfectCousin

For a retail shop premises, is it normal for the tenant to reimburse the landlord for the cost of his buildings/fire insurance?

I've seen plenty of evidence that this is normal, on the other hand, I've also been advised that the landlord should be responsible for insuring the fabric of the building.

It's also been suggested by another advisor that the cost should be shared between tenant and landlord.

What's your experience?

antoinolachtnai

It is the landlord's responsibility to insure. He probably has a duty to the bank to do this. But it is the tenant's responsibility to pay for it, quite often.

There is no good reason why the tenant should not pay the insurance in its entirety. The tenant inevitably has to pay for it, whether indirectly or directly.