If you are planning to open a store in a shopping center, you will want to first understand all the costs involved. Although the cost to rent a store at a shopping center varies, there are generally pre-defined buckets or categories to consider.
What Does it Cost to Rent a Store in a Shopping Center?
This will depend on the area, location, street, access, size of the store, and location of the store within the center. All things being equal, the below are some rules of thumb when considering costs:
- The middle of a bustling city will cost a lot more than a quieter, rural market
- A busier street will cost more than a less busy street
- Great street visibility will cost more than a hidden street
- Great access (i.e. can cars turn in easily from both sides of the street) will cost more than a center that can only be turned into from one side of the street
- A larger store will cost more than a smaller store (you pay per square foot)
That being said, typically, you pay the base rent plus what is called a triple net (NNN) lease. This generally means, you, as the tenant, must bear all expenses, including –
- Base Rent
- Property expenses
- Real estate taxes
- Maintenance
- Insurance
- Common area expenses
- Utilities (water, trash, gas, and electricity, etc.)
Since these additional expenses are borne by the tenant, landlords usually charge lower base rents (again depending on the location). Most triple net leases are usually set for the long term – 10 years or more, with an option to extend, but this again could vary based on your agreement with the landlord. Taxes and insurance are pro-rata and based on your store size.
Not to mention, you also would be responsible for building out the store to meet your needs. This includes all engineering, construction, lighting, decoration to configure the space to your liking.
Why Rent a Store in a Shopping Center?
Getting your business in front of as many people is possible is the goal of every business. There are several ways of getting your business in front of as many people as possible (who may not have otherwise known about your business). This could be done exclusively in what is referred to as “bricks and mortar†which refers to a physical location, or online. More and more businesses are choosing to do a combination of “bricks and mortar†and online. A well-located shopping center gives you the opportunity to do that. You need to balance the location (density of people), easy access to the store, with costs as rent will be one of your biggest expenses.
By way of example, rent for retail space in Center City Philadelphia could easily be $70 per square foot per year or $5.83 per square foot per month. So, if you want 1,500 square feet, that’s $8,750.00 per month plus all the other expenses above.
Another option is to remain in the city with the benefits of density and traffic. By locating on outside of the central business district (downtown), selecting a busy street with good eye contact from pedestrian and drive-by traffic, and strong disposable income demographics, you could spend considerably less on location without giving up much gross income.
Imagine if you do the same top-line revenue but your base rent is only $2,100 as opposed to $8,8750. That’s a major difference-maker in your business, especially as you are getting started.
Research a few shopping centers that meet your needs and develop a business plan and Pro-forma with some basic costs.
At the end of the day, the cost of renting a store in a shopping center will vary based on a multitude of factors. Take the time to consider every aspect before you sign any long-term lease agreements.
