Retail leases are complex, and it isn’t necessarily the amounts of paperwork involved or the extensive lease legislation in each state and territory.
The complex aspect is entering into a lease (or renewal) before the paper trail really starts – that’s right, negotiating a retail shop lease!
Whether you are an independent outlet, small/large chain or franchisor/franchisee, the following mistakes are being made every day, and can be avoided.
Mistake one: not leveraging time.
Every lease is different except for two items: a commencement date and the most important one, an expiry date!
Leaving your lease renewal/option negotiations until 6 months before hand is far too late to achieve the best possible outcome, you are leaving money on the table!
You need to be engaged, resourced and researched 18-months before such a major leasing event, otherwise time will quickly become your enemy instead of your friend.
Tip: Register your lease expiry with ARA to receive email reminders and action checklists 18, 14 and 12 months before the event. Register here for FREE.
Mistake two: not knowing your numbers
There are two basic measures of how the real estate (under lease) is performing for you (instead of you performing for the Landlord)
- Occupancy cost ratio: is a measure of the gross rent as a ratio of gross sales. This ratio can then be compared to similar retail usages, your portfolio, franchise network and industry benchmarks to assess how the business is performing.
- Sales per m2: this KPI is simply your gross sales divided by your net lettable area (size of your shop in m2) Again comparing to the aforementioned, you can identify if you are leasing too much space or don’t have enough space for future growth.
Tip: To understand more about these formulas download a FREE copy of Retail Lease Digest here.
Mistake three: no research
Research is mandatory. Regardless of any leasing event you should be constantly researching and have an in depth knowledge of your business, your retail sector and the market you trade in.
To be effective and achieve a better outcome you need to research the following:
- Your industry
- Your market (majors and neighbours)
- Shopping centre/strip
- Other available premises
Tip: The resource to do research is not about the cost but about setting aside your time and understanding the importance on the outcome.