Choosing the right commercial space is a critical factor for business success. Location, size, and layout all play a significant role in determining your operational efficiency and bottom line. Here’s what you need to know before you sign that lease.
Too Much Space?
Many businesses find themselves leasing more space than they actually need. While it may seem tempting to secure a larger unit, especially if you’re planning for future growth, too much space can become a financial burden.
Consider the following story: we once consulted with a tenant leasing 8,000 square feet of space, but they couldn’t afford the rent. They checked with neighboring tenants and found they were paying similar rental rates, but our client was leasing far more space than required. After a series of discussions, they successfully negotiated with the landlord for the tenant to surrender 3,000 square feet. The result? A $45,000 annual reduction in rent, making the tenant’s business more viable.
While too much space can be problematic, too little space can also create issues. If your store is too small, it can feel cramped and cluttered, discouraging customers from staying or returning. We worked with another tenant who believed that expanding his space would lead to business growth. After negotiating with the landlord, they were able to lease the adjacent space, allowing for growth while still keeping costs manageable.
Additional Costs
In addition to your base monthly rent, you’ll often pay operating costs or CAM (common area maintenance) fees. These fees can add up quickly, especially when leasing larger units. The amount you pay is usually calculated based on your square footage, so more space means more operating costs.
It’s crucial not to rush your decision if there are no suitable spaces available. If a space is too small, it will likely have less frontage, reducing your storefront exposure—something that’s essential for many businesses.
When deciding between locations that are slightly too big or too small, location is often the deciding factor. A slightly smaller, better-located space might be more beneficial than a larger unit in a less desirable area. Businesses that feel their space is too small are often making a profit and just want to grow. On the other hand, businesses with too much space usually need to downsize to reduce their rent and improve their bottom line.
Shape Matters
Not only should you consider the size of the space, but also its shape. A poorly shaped commercial space can be just as problematic as having too much or too little square footage. For instance, we once talked to a client about leasing a commercial retail unit (CRU) that was supposed to be the best option available. Unfortunately, it had a large utility room at the back, making a significant portion of the space unusable.
They decided on walking away from the deal, and within days, the landlord reconsidered and offered a better space without the utility room. Our client ended up leasing a location that was more suited to her business needs, while another tenant took the less desirable space.
For retail tenants, a square box is typically the best shape. Rectangular CRUs are common and acceptable as long as they are wide enough and not too deep. Most retail businesses should aim for a space that is at least 18 feet wide, with a 20-foot storefront providing better visibility and versatility.
The Bottom Line: Take Your Time
Leasing commercial space is a big decision that can impact your business for years to come. Don’t rush the process. Carefully evaluate both the size and shape of the space, and be sure it aligns with your business needs and goals. If you’re unsure, consider seeking professional advice to guide you through the lease negotiation process.
Leasing the right commercial space is crucial for your business’s long-term success. Want to make sure you’re choosing the best option for your needs? Book a free consultation with our experts today!
Author: Jeff Granfield, The Lease Coach
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