Since the cost of retail lease space is determined, in part, on size, this is a fairly important consideration before signing a lease agreement. You might be surprised how many people do not give this question the time it deserves. Thus, the need for this article.
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Determining the size of retail lease space needed
What size building or store do you need? When laying out, on paper, your retail store, the amount of selling space will be a crucial factor in selecting the right location. It can also provide you with many headaches.
As with any new business, most of your assumptions will be based on industry research and comparing similar stores operating in similar locations. To get an estimate of how much retail space your store must have, divide the planned sales volume by your industry’s sales per square foot.
Sales Volume ÷ Sales per Square Foot = Selling Space
A practical example to consider: your proposed bookstore will generate $250,000 per year in sales and market data says the average sales-per-square-foot in a bookstore is $150. By plugging those numbers into our formula, the amount of selling space you will need is approximately 1,666 square feet.
Deciding How Much Space
But do you need this much space? That is just one of the many difficult questions you need to answer. Too large of a retail lease space, and your store will look empty, and that’s not very inviting to customers. Too small of a space and your store will look cluttered, which in the case of a bookstore might create an interesting vibe, but for other stores would be a bad idea.
Besides just choosing how much square footage you want; be sure you’re also considering the location. A new strip mall seeking tenants might be offering cheaper-than-usual rents to fill space, but is it worth the risk to be one of the first stores in an untested location? Do your homework to determine whether the rest of the area is busy enough to drive traffic to your store’s location.
These are not easy things to decide.
We start with a tough task: predicting your yearly sales, especially that first year of business. You must then decide whether the industry standard of sales per square foot will be accurate for your business, which is not always the case.
An inexact science for sure. Your only logical approach is to research, gather as much information as possible, talk to as many local experts as possible, and make your best guesstimate. As inexact as that advice is, it really is the only approach you have which makes a modicum of sense.
A final word about RDS Real Estate
RDS Real Estate is locally owned and operated, and that means we go the extra mile for our fellow Fort Worth neighbors. Call us no matter what it is you need i.e. warehouse for rent, shop for rent, flex space, retail space for lease, office space for lease, we have it all.