Published in Retail Newsagent Magazine, 12 Feb 2016 |
Two weeks ago, a report in RN highlighted the fact that many retailers have taken advantage of trading conditions and expanded their businesses by opening new stores.
Many of the store owners I have acted for and spoken to have done that either by opening a new shop in a vacant premises or buying the goodwill of a business that was already trading but was on the market.
I often get asked which of these offers the best option in terms of getting a reasonably quick return on investment. This can depend on many things, but in my view, opening a new store in a vacant shop or one that has closed can make a lot of sense. It opens up the possibility of negotiating very favourable terms on a new lease, or on the purchase price if a freehold property is involved. As always, negotiating is key and holding out for the best possible deal will pay dividends.
Once the location and potential premises for a new store have been identified, it is a case of making contact with landlords or agents and getting hold of the basic terms on offer.
Retailers shouldn’t be too put off by the prospect of taking on a vacant shop simply because the rent and rates quoted by the landlord seem very high. Commercial property is a very simple business and I therefore always take the view that the key thing for landlords is putting a bum on a seat (so to speak) and keeping the tenant happy. If landlords do that, tenants have no reason to leave unless something outside of their control changes. I recommend always taking the stance with landlords that if they have an empty unit and someone wants it, there is a deal to be done somewhere, regardless of what the property details say.
Commercial rents are driven by open market forces and general demand in particular, but landlords want to avoid empty units, especially in shopping centres or busy parades where footfall has a heavy impact upon demand for shops. When these types of premises are full, it pushes rents up in an area, but one or two voids can change things overnight and it is a question of sometimes being in the right place at the right time to get the best deal.
In addition, landlords want strong covenants and that simply means the quality and awareness of the name over the door. Landlords want quality tenants that attract footfall and that will in turn attract other tenants to any other units that become vacant.
I have been involved with negotiations for several WH Smith Local franchises recently and landlords I have spoken to have loved what the brand brings, especially if has a Post Office sign alongside it. This has been my experience with all of the symbol group brands because commercial property landlords like known names, which bring quality to their properties and developments.
So how can this be of use in negotiations with landlords? If they want what your store has to offer, chances are they will be prepared to negotiate on the terms to get you in there. It is not unusual for landlords to offer protracted rent-free periods, stepped rents and other incentives to ensure you can make a positive decision. Never be frightened or worried about asking for a better deal based upon the quality of business that you bring to a landlord, and if the deal isn’t right, walk away and see if there is anything else suitable in your chosen area. Remember the key phrase in commercial property negotiations: if you don’t ask you don’t get.
How to negotiate for a new property
- Identify several suitable premises in your chosen geographic area
- Don’t be intimidated by the agent or landlord
- Prepare information such as cash flow and projections to support negotiations
- Highlight what your new store can bring to a development or parade
- Take your time, make the landlord think you are not in any rush, let him come to you if necessary
- If you don’t ask, you won’t get. The worst they can only say is no.