Real Estate Retail Frequently Questions

Where to put your business.

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Leasing a Space for Your Retail or Service Business

So, you are renting a space for your retail or service business? You have lots of questions. Here is a primer on those questions.

The real estate leasing agent will be quite helpful but do understand that he or she is most likely hired or on contract with the property owner. So, even though in many states, they are required to be for both the buyer/seller and leasor/leasee, the reality is that they work daily with the owner and developer and their paycheck is cut by that owner or developer. Take all precautions in your favor, as the landlord is doing in their favor.

You will need to make basic assumptions regarding the location of your business. You will also need your own real estate lawyer. Make sure your lawyer is a real estate lawyer as real estate law is a very specific type of law. A good real estate lawyer is worth their weight in gold.

How is the customer traffic?

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Should I lease in a neighborhood or community strip mall, an enclosed mall, or free standing location?

Location, location, location are the three most important factors in real estate. The right location may make your business and the wrong location may destroy your business. Should you locate in an enclosed mall, in a strip mall, or a free standing building?

How to assess which location is best for your business.

Destination Business

Is your business a destination business? This means do people specifically get in their cars to visit your business. A typical destination store would be a tax preparation business, uniform store, veterinarian clinic, eyeglass store, and children’s shoe store. Customers know they want those items and will go to where those items are sold. Very few customers are strolling the mall and say: “Yikes, I need to go in and spend an hour or so buying new eyeglasses!”

If you are a destination store you may not want to pay those higher enclosed mall lease rates. You may be better off in a strip mall or free standing space. After all, people leave their homes or places of work to specifically go to your store.

Casual Purchase

Is your business a casual purchase store? This means the customer did not necessarily know they were going to purchase earrings, a shirt, or a sandwich at your sandwich shop when they woke up that morning. Are there many other stores in your category in many other places that are also marketing to your customer? This means you need the heavy mall customer foot traffic.

If your location depends on lots of walk-by spur-of-the-moment or point of purchase traffic you will want to be in a mall or a busy walking street.

Malls and busy walking streets have higher rents because of the heavy traffic they attract.

Community or Neighborhood Mall?

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Dangers of Big Store Vacancies

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Neighborhood or Community Strip Malls

That neighborhood or community strip mall may be just the place for your business. Strip malls have other businesses that do bring traffic near your store and those customers become familiar with your store by shopping the other businesses. The parking is excellent and customers demand close up and safe parking.

If your business is a neighborhood oriented business, the strip mall will place you in the easy back yard of your customer. Suppose you are a sandwich franchise store. While, you strive to make the best sandwiches, it is highly unlikely that the customer will drive past a dozen other same named franchises to eat at your franchise. However, if you are in the neighborhood or community strip mall they will find it easy to get to your store and buy your sandwich. The same may be said for dry cleaners, hair salons, jewelry repair shops, and the like.

There are two additional things to note regarding neighborhood and community strip malls.

These malls often have a big box store such as a grocery or mass merchandise store located in the heart of the strip. This is great when the store remains open. Traffic can plummet if that big box store goes dark/moves out. You should try to negotiate a lease that lets you out if the big box store goes dark. It can be done.

Big Box stores often lease to other smaller businesses and put them in the inside front of their store. This is called ‘stores within stores.’ Think of the eyeglass stores, hair dressers, nail salons, tax preparation kiosks and the like that are inside many big box stores right now, these are ‘stores within stores.’ Will this competition negatively affect your hair salon, nail salon, tax business? Again, you may use your lease to protect yourself against a big box placing a replica of your business inside their store. Ask to be released from your lease if the big box store puts in exact competition to your business. It can be done.

The Advantage of a Mall

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Enclosed Malls

Malls are great for all matter of stores that depend on walk by traffic. The mall provides a clean, brightly lit, safe, and comfortable location for the shopper. Malls also provide a high entertainment value for the shopper. Walk the mall you are interested in. Note the stores they have. Are these stores complimentary to your merchandise? Malls have made many small stores into national brands.

Free Standing Locations

Free standing buildings work for many businesses. A business in a free standing location needs to assess the location for traffic and demographic needs. Fast food restaurants as well as diners do very well in free standing locations. Many are considered ‘out parcels.’ That is a parcel on the far reaches of a shopping type of center, larger stores do well in them but other successful examples include fabric stores, auto repair shops, vet clinics, uniform stores, and coffee shops. Note they are also mostly destination locations. If your store needs lots of space you will need a free standing location in order to secure the space that you need.

Which is best for you?

Nearly every property will have both a demographic and psychographic report on who their shoppers are at each property. You should also understand your customers’ demographics and psychographics. Please read Keys to Effective Marketing article listed below for information on understanding the demographics and psychographics of the customer.

Use these basic guidelines to begin the process of where you want to place your business for maximum success. Contact a commercial real estate agent and begin looking!

Good leasing!

A good book for tenants

When I teach my real estate course I recommend the NOLO book below. You will still need a good real estate lawyer though!

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Comments 3 comments

NMLady profile image

NMLady 4 years ago from New Mexico & Arizona Author

mpropp, it depends on whether the landlord is desperate to fill in the stores and/or if it is the end of the quarter and the leasing agent is 'just one' lease away from making the next level of pay!! Also, IF your store is highly desired. Granted not many Mom & Pops can play the highly desired card...... Maybe the store can negotiate a rent break instead or that in x months they can get out.......


mpropp profile image

mpropp 4 years ago from Minnesota

Very good hub. I didn't know you could negotiate ways to be released from the leases, if the big box store went out of business or relocated. Unfortunately, I've seen this happen too many times in the strip malls and they go from thriving businesses to ghost towns almost overnight. Thanks for sharing your expertise!


Maddie Ruud profile image

Maddie Ruud 4 years ago from Oakland, CA

There are so many factors that go into deciding on a location for your business. Thanks for illuminating some of them for us!

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