Spotlight on the retail sector

It is no secret that the retail sector has taken some hard knocks in recent years, hit by a combination of the financial downturnchanging consumer habits and the uncertainty of Brexit. The rise of out-of-town retail centres and online shopping has changed the face of retail across the UK. Those of us living near local high streets may be familiar with a regular churn of small businesses setting up only to close down a few months later. Retail names we thought of as national institutions only a few years ago are now closing stores, leaving some gaping holes in the fabric of our city centre high streets.

Retail might feel like a daunting place to be at the moment, but it is not all doom and gloom. In some areas, shops and restaurants are thriving amid a growing sense of community and support for small businesses. Shoppers and diners yearning for bespoke, high quality items or simply great service from real people are breathing new life into high streets across the country. Market commentators are increasingly talking about the movement of council investment away from out-of-town complexes and back into the regeneration of town centres, with speculation that unoccupied retail units will be repurposed for healthcare, leisure and community spaces to increase variety and footfall.

Lease Agreements for Retail Stores

The truth is that no two businesses are alike, and no two properties are alike. Securing the right premises is one of the most important steps a retail business will take, and the terms of the deal are critical to providing the security or flexibility that a business needs in order to thrive. Flexibility in your lease agreement might be essential to allow you to move if the market changes, or if you operate as a pop-up business. Alternatively, when you find the location with the perfect footfall and demographic of customers for your business, you may prefer the security of a longer term lease. You may decide that buying a property is right for your business, although in this article we focus on rental since this is a common approach for many business owners.

Considerations When Choosing a Retail Premises

You need to consider the suitability of the premises for both your current business situation and any plans you have for future growth. How much space do you need for stock, shop floor, food preparation or displays? Who are your neighbours (are they complementary businesses or competitors?) and does the surrounding community represent the target market for your product? Is there good public transport and parking for staff and customers? Will the footfall be sufficient to support the trade you need, or will you make use of cheaper rent in a less popular area and supplement in-store trade with online retail? Are there any regeneration developments, public transport extensions or seasonal markets planned in the area? If your business is already well established, it is still vital to consider all of these variables in any new location or when you are facing a lease renewal.

Terms of the Lease

As well as finding the right premises, it is important to think very carefully about whether the terms of the lease itself are favourable or could hinder your plans. This is true both when you take on new premises and when an existing lease is approaching renewal. It is good practice to seek legal advice while you are looking for the perfect property, to ensure you are well prepared if the right opportunity comes along. If you already rent premises, you should take advice well before the existing lease renewal is due – usually more than a year in advance. Your solicitor will help you understand your options in relation to issues such as the length of the agreement, break clauses, liability for dilapidations, whether you can assign the lease if you decide to move, and user clauses – can you actually sell what you want, in the way you want, under the terms of the lease?

Factoring Business Rates into the Running Costs for Retail Premises

You must factor business rates into the running costs for the retail premises, as they make up a significant proportion of the monthly outgoings. Rates are calculated based on the rateable value of the business, although you may be eligible for business rate relief. They are calculated differently in Scotland and Northern Ireland, so seek specialist advice to ensure you have properly planned and budgeted, and claimed any relief to which you are entitled. Factor in deposits, insurance, security and utilities, as well as fit out costs. It is worth looking out for initiatives in your area designed to attract new businesses with financial incentives.

As with all business decisions, we cannot predict the future but we can prepare for what we know. Talk to local business owners, and do your research before deciding on the right spot for your store. Remember to think about the long term running costs of the premises as well as its practical suitability, and seek timely advice from legal and financial advisors you trust.

Should you have any questions then please feel free to contact our Commercial Real Estate team on 01582 731161 or email