Prepared by Dylan Beach
Negotiating a lease can be a stressful and somewhat difficult task with every location and space different for every retailer. With this being considered, it makes it hard to follow a set of rules around the topic. There are however a few guidelines that can make it a little easier and provide some guidance when negotiating a lease. Nick Weir from Beaches in SA, Star Surf’s Wooly and Victor Tilly from Red Herring in Tasmania helped us out on the difficult topic. Each of the retailers gave their 5 points to consider before entering into lease negotiations.
1. Research is key.
Nick – Do your homework and make sure you keep time on your side. Especially with the bigger centres. It helps to know who you’re dealing with and what motivates them, when they organise their budgets etc.
Wooly– Talk to leasing agents and business owners, what are the rates around the immediate location are you are looking at? What are other tenants paying?
Victor– Talk to other tenants in the centre, some will talk to you and this will help set some parameters in regards to rentals both asked for and achieved.
2. Know your business.
NW-Know your numbers inside & out. It goes without saying, but being well researched includes your own industry and every possible scenario that might arise over the term of the lease.
Wooly– Can you afford it? Does it make sense? Can you run a profitable business paying than rent? What happens if you have a 10% downturn in sales?
3. Double, then triple check the Lease Details.
Victor- Do your math and do it for the length of the lease. Realise that 3-5 years down the track by the time % increases have come through (and compounded over that time) it may be a very different scenario to when you took over the lease. Check and double-check the lease details. There are so many ‘hidden’ extras that are slotted in and ensure that if and when you leave what make good works you have to do and make sure you factor these in. You will get charged for everything – security, Sunday openings, rubbish removal, marketing, etc etc. some of these show in the outgoings others just turn up on your statements.
Wooly– Variable Outgoings. What are they? Is there any other costing in that look high? Marketing levy? Council rates, land tax (yes, in WA tenants pay the land tax). Look into them and have a good idea of the price you should be paying.
4. Seek advice.
Victor- Get a lease negotiator in – at a certain point it will just do your head in so get someone in to help.
NW- Don’t be afraid of seeking advice. There’s a lot of firms that specialise in retail leasing & whilst they might charge like a wounded bull, they could well save you thousands over the term of the lease. Just don’t get them to negotiate on your behalf, especially with the big centres.
Victor- Be prepared to walk. As a sitting tenant you will not get any deals that are offered to ‘new” tenants and you have to be prepared to exit a lease or not take it on unless the correct deal can be struck. This is easier said than done but you have to be serious about leaving if it doesn’t work.
NW- Maintain relationships. A coffee every couple of months goes a long way. Even if you do want to throw it at them every now and then.