First Time Retailer? 3 Questions Answered About Retail Real Estate
THREE QUESTION THURSDAY:
Join your hostess (with the mostess), Olivia Garrett and Keyser advisor, Braden Langenfeld we dive the following three questions:
1.When it comes to a broker’s opinion of value what does that really entail?
2. How long can companies expect to go through the lease negotiation process?
3.What does an initial payment for a commercial space look like?
(Transcription of video)
Olivia: Hey there Keyser Community and welcome to Three Question Thursday.
Today I have Braden Langenfeld here, he is a retail expert.
So–we’re going to focus our questions on the retail space today.
When it comes to a broker’s opinion of value what does that really entail?
Braden: So–in the retail sector this is based on a lot of different factors.
A couple of the big ones are going to be your co-tenancy.
So, we’ll look at each of the businesses in the center and judge them kind of based on how much traffic they drive.
We typically like to see brands with a lot of national recognition.
Brands like Starbucks, Chipotle, sprouts are all typically good indicators of a healthy center.
Another big one is going to be your visibility.
So, where you are actually located in the center is going to directly impact how many people are going to see your storefront and your signage on a daily basis.
And that’s also going to really drive the price of that space as well.
When you’re launching your business you may not always know all of the things that go into your calendar.
So–how long can companies expect to go through the lease negotiation process for?
Braden: As a rule of thumb, we generally like to tell our clients to plan for about three months from the start of the site search process.
Until the lease is actually signed.
So, one month for the site search and approval, one month for the LOI negotiations, and one month for the lease negotiations.
Now that can obviously vary a lot depending from situation to situation.
But typically, three months is a good starting point.
Olivia: And if your site needs a lot of work or tenant improvements make sure you budget extra time for that.
People are usually pretty familiar with a residential lease structure.
You pay first and last month’s rent, up-front as an initial payment.
What does that look like for an initial payment for a commercial space?
Braden: So–in addition to first and last month’s rent and triple nets, most landlords are also going to want a security deposit as well.
Now the difference a commercial security deposit and a residential security deposit is
our security deposits are usually pretty negotiable.
So, that’s something we always fight for in the LOI and lease negotiation stage to make sure to mitigate that as much as possible.
So that money is not tied up as our clients are trying to get their businesses up and running.
Hopefully this week’s three question Thursday was helpful for you.
Thanks, see you next week!
Questions about the commercial real estate industry, the life of a broker, tips on your lease negotiation, or anything else? Let us know, we would love to feature your questions in an upcoming episode of Three Question Thursday.