Rules
Part of Retail space before you sign: foot traffic, neighbors, percentage rent, delivery condition
Retail space mistakes grouped by the moment they actually happen
Nine retail space mistakes grouped by moment: before the search, at the negotiating table, and after signing when the fit-out and the approvals run.
Retail mistakes cluster at three moments: before the search, when you have not yet decided what you need; at the table, when the clauses are being set; and after signing, when the fit-out and opening sequence run. The nine below are grouped that way, with the fix beside each.
What to take away
- Most retail errors come from checking the unit and not the position, the landlord's rules, or the local authority's rules.
- Definitions in the lease, of sales, of the exclusive, of comparability, of the commencement date, do more damage than any rate.
- The opening sequence is longer than the construction program, and rent usually starts before the doors open.
Before the search
1. Deciding the area before deciding the format
A retailer who starts from a floor area shops for area. A retailer who starts from how customers move through the shop, how much stock must be on hand, and where deliveries arrive, shops for a shape that works. The first buys a deep, narrow unit with a stockroom in the wrong place and spends the term working around it.
Fix: write the format first, then translate it into a unit specification with testable items.
2. Believing the footfall figure
Agents and center managers quote counts that are usually real. They measure people passing a point, at hours you did not choose, in a mood you cannot see.
Ask how the count was produced, as the federal travel volume trends program publishes its method alongside its numbers. A tenant who signs on that figure has not measured the only thing that matters: how many of those people would come in.
Fix: count yourself, at your own trading hours, on more than one day, and watch what people do rather than how many there are. The method is in retail space.
3. Assuming the previous shop's permission carries over
"It was a shop, so it can be a shop." Most zoning tables use narrower categories, and food, alcohol, personal services, late hours and outdoor trading are commonly treated separately.
The last tenant's approval says what they were allowed to do. If the old activity no longer matches the district, the protection it relied on may be a nonconforming use that has already lapsed.
Fix: identify the zoning district, read the use table for your specific trade, and ask the planning office in writing. The steps are set out in zoning and permits. Make the lease conditional on the answer if it has not arrived.
At the table
4. Signing a percentage rent clause without defining sales
The percentage is negotiated with care. The definition of gross sales is left to the landlord's form, and it sweeps in sales taxes, refunds, gift cards, delivery commissions and online orders. The breakpoint is a fixed number that becomes artificial as base rent rises.
Fix: negotiate the definition and the breakpoint formula before the percentage. The general rules for reading a lease's money clauses are in commercial leasing.
5. Accepting an exclusive that protects a word
An exclusive on your category, as the landlord's form defines it, can be sidestepped by any neighbor who describes their business differently. And an exclusive without a remedy is a courtesy.
Fix: define the protected category by what a competitor would actually sell, list what it does not cover, and attach a remedy: rent reduction, a termination right, or both.
6. Ignoring the clauses that respond to other people
Co-tenancy, relocation, continuous operation and radius clauses each change your position because of something a neighbor, an anchor or the landlord does. They are skimmed because nothing is happening when the lease is signed.
Fix: read each as a scenario. What happens if the anchor leaves? If the landlord moves you? If you need to close for a month? If you open a second store? If the answer is unacceptable, negotiate the clause, not the rent. A retail space checklist of the clauses that respond to other people is worth writing before you sign.
After signing
7. Fitting out before the approvals
Contractors are booked, the shopfront is ordered, and the landlord's design approval or the authority's signage permit has not arrived. One of them asks for a change, and the work already done is redone at your cost.
Fix: map the approvals in order: landlord design consent, change of use if any, building permit, signage permit, health or licensing sign-off. Start construction only when the ones that can change the design are in hand. The sequence, and who pays when it slips, is covered in tenant improvements.
8. Letting rent start on a calendar date
The lease fixes a commencement date. The landlord's works run late, or the permits do, and you are paying for a unit that cannot open. The rent-free period that was meant to cover the fit-out is consumed by delay.
Fix: tie commencement to delivery in the agreed condition, make landlord delay push your dates day for day, and size the rent-free period to the whole opening sequence rather than to the construction alone.
9. Taking possession without a record
The unit is handed over, work starts, and at the end of the term the landlord's schedule of dilapidations includes damage that was there on day one and fixtures you inherited from the last tenant.
Fix: photograph everything on the day you take the keys, agree a condition schedule with the landlord, and record in the lease which existing fixtures are yours to keep and which you will not be asked to remove.
The three moments, in one table
The three moments
| Moment | Mistake | Fix in one line |
|---|---|---|
| Before | Area before format | Write the format, then the unit spec |
| Before | Trusting quoted footfall | Count yourself at your hours |
| Before | Assuming the use carries over | Read the use table, ask in writing |
| Table | Undefined sales | Define gross sales and the breakpoint formula |
| Table | Exclusive on a word | Define the category and the remedy |
| Table | Skimming reactive clauses | Read each as a scenario |
| After | Building before approvals | Map the approvals, then build |
| After | Calendar commencement | Tie it to delivery, size the free period to the sequence |
| After | No possession record | Photograph, schedule, list fixtures |
Common questions
Which of the nine costs most?
The use assumption. A unit you cannot lawfully trade from costs everything, and the lease does not release you because the municipality said no.
Is it a mistake to take a unit in a center with a weak anchor?
Not on its own. It is a mistake to do so without a co-tenancy clause that responds if the anchor goes.
I have already signed with a fixed commencement date. Anything to do?
Ask for a side letter tying rent to delivery, in exchange for something the landlord wants, such as a longer term or a stronger guarantee. Failing that, manage the approvals as if every week is money, because it is.
How much of this applies to a short pop-up?
The permission and the condition record. Everything else scales down with the term.
