Negotiating the Best Lease and Location for Your Business

Category: Operations

What is one of the most important issues when opening (or relocating) a business? Proper site selection. Site selection is so important, in fact, that we have given the topic a full chapter in our book, Negotiating Commercial Leases & Renewals FOR DUMMIES. Proper site selection includes a number of criteria: your business location, the monthly rent, available parking, signage, visibility, the location within the location (you may be in a busy shopping mall; however, your business may be located at the end of a quiet corridor), and so on.

The commercial rent (along with the amount charged for operating/common area/CAM costs) can make or break your business. Therefore, you would be wise to devote a great deal of time and effort scouting out possible locations, weighing the pros and cons of each site, and comparing monthly rents (or contact a professional to help you with this process).

Many tenants are shopping for cheap space, but for the most part, get what they pay for location-wise. On the other hand, some tenants are drawn to the shiny new buildings or trendy locations that come with a high price tag but no guarantee of a profitable business. Many successful businesses pay very high rents, and many businesses fail in locations with very modest rents. There are many factors to consider when selecting what area of the city is right for you. Here are just a few:

Distance from Target Customers

A sensible business decision is to locate your business near to your target customers—where do they live? Unless you are offering a premium product/service, your customers may not want to drive farther than they absolutely must to reach you.

Visibility to Customers

If your business relies on walk-in or drive-by traffic, you may have to focus on very prominent buildings (older or newer) to have your customers easily find you and get them in your door. If your business is primarily referral-based or your customers are seeking you out (through online searches or other means), you may have the flexibility to be in a less prominent space in an older building or area of the city that may come with lower rents.

Condition of the Property

You may find an older commercial property with space for lease at a cheaper monthly rent; however, what does this property look like from the outside? Has the landlord been negligent with upkeep? If the building is too run down, your customers (not to mention any potential purchasers, should you ever decide to sell your business) may hesitate to stop in.

Condition of the Leased Premises

Beyond the exterior of the premises, you’ll need to be cautious of hidden costs that may be inside individual units in older properties, even if the outside has obtained a facelift making it look revitalized. Older properties can come with outdated electrical systems, plumbing that needs upgrades, failing heating, ventilation, and air-conditioning (HVAC) units, or even hazardous asbestos, which can result in some very high unexpected costs that are often the responsibility of the tenant.

Condition of your Surrounding Properties

As an extension to our previous point, you may have found the diamond in the rough property that has been updated or redeveloped but is surrounded by buildings that are rundown or vacant. Ask yourself: who are your potential business neighbours? Will these businesses help or harm your business venture? As The Lease Coach, we remember one bookstore tenant who set up shop directly beside a bar. Each morning, the bookstore owner had to clean up outside after the night before.

Parking

An older building may not have an abundance of parking spaces available for your customers—thus forcing them to park on the street or further away from your business door. This is also common in trendy redeveloped areas that were not designed for the influx of customers or cars when originally built. Do not overlook whether parking is free or requires payment and consider how this would impact your target customers. Most properties in the downtown, high density, or trendy areas will require paid parking for customers and staff while newer developments in new neighbourhoods will often have free parking.

Public Transit

Many older developed neighbourhoods offer access to public transit. If your customers rely on public transit, you must consider how they will get to your location as many new developments in growing areas of the city take years to have the same ease of access to public transit—if ever.

Whether you’re looking for the excitement that comes with a newer development or the charm that often comes with older established properties, you must realize that different locations will impact both your business expenses and your sales. It is the location that will produce the best bottom line numbers that you should be pursuing!

 

For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please e-mail your request to JeffGrandfield@TheLeaseCoach.com.

 

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About the Author

headshot of Jeff Grandfield

Jeff Grandfield

The Lease Coach

Dale Willerton and Jeff Grandfield - The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Dale and Jeff are professional speakers and co-authors of "Negotiating Commercial Leases & Renewals FOR DUMMIES" (Wiley, 2013). Got a leasing question? Need help with your new lease or renewal? Call 1-800-738-9202, e-mail DaleWillerton@TheLeaseCoach.com / JeffGrandfield@TheLeaseCoach.com or visit www.TheLeaseCoach.com.

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