Your guide to commercial real estate leasing and investing

Leasing the right retail space requires careful planning, studying, and consideration of your options. In this complete guide to small retail spaces for rent, we help you discover how much retail space you need, the advantages of small retail spaces for rent, the must-have features of a retail space, and how you can lease a small retail space for your business.

Small Retail Spaces

Covered in this article:

Why is Retail Space Important for Your Business?

Online shopping can be an attractive avenue for purchasing goods, but it does have its downfalls where traditional businesses can shine. A retail storefront provides a physical store location and a home base to jump-start your business while also possessing the capability of supporting an online business, all from one location. Below we will discuss five key benefits of leasing retail space for your business.

1. Provides a Homebase for Your Business – Entrepreneurs who have small businesses moving into a retail space can make their professional image skyrocket. Having a physical retail space further establishes your business, making it easier for prospective customers to locate your store.

2. Helps You Balance Work and Home Life – Many small business owners who work out of their homes find it difficult to separate work from play. Their home is both a place for home-related activities and work. When you have a retail space for your business, you will find it much easier to balance your work and home life as they have their distinctly unique locations of operation.

3. Helps Build Your Brand – Every business brand needs to become established, and yet, at the same time, it must evolve and grow. Having a retail space will contribute to the evolution of your brand. You will be able to set the stage and build the atmosphere that you think best suits your products and professional image.

4. In-Person Connection – with a physical store, you gain opportunities to showcase the humanity of your business. While e-commerce has attractive features such as free shipping, discounted add-ons, and special offers, it lacks the human-to-human interaction that traditional businesses thrive in. The fact that 78% of retail sales happen in physical retail locations supports the power of in-person connection.

5. Ambiance – while your website can tell your brand story, it does not compare to the ambiance or feng shui you can create for your brand in a physical store. With a brick-and-mortar store, you can set a mood with lighting, shelf and product placement, music, wall colors, and generally, make an impact for how the place will look and feel to customers. Physical ambiance contributes to a positive shopping experience for your customers.


Use case for small retail spaces: Who are they for?

Is a small retail space the right fit for your business? Small retail spaces are specifically suited for a specific type of tenant or business.

small business spaceBusinesses on a Growth Trajectory- In general, small retail spaces are a popular option for businesses looking to start or grow their business. Typically, a smaller square footage space leads to lower monthly rent, which means less risk for a young business. Smaller spaces also sometimes offer shorter lease terms, which can appeal to businesses on a fast growth trajectory. These businesses may need more space on a shorter timeline than 3-5 years, typical of a larger commercial space lease.

Small Business Incubation- Small retail spaces provide a retail location for small businesses. This both supports the small business and helps to incubate local businesses. Location is critical as a physical location can buoy up a  local and loyal customer base.

Retailers in Specific Industries– Some industries naturally lend themselves to needing a small retail space. These industries can include food, clothing, beauty, technology, and other similar industries. Businesses that require customers to shop in-person, businesses with a very localized customer base, or companies that provide in-person-only services.


How much retail space do you need?

Once you understand the power of physical retail space, you must determine how much space your business requires.

To determine how much retail space you need, start by following these four steps:

1. Develop a store layout. As you create your layout, consider the following:

  • Will the new space need to be the same size or larger than the one you have now (if you currently lease a retail space)?
  • Does the space need to allow for future expansion if your business takes off?
  • What’s the minimum sales floor area required?
  • Is a large stockroom needed?
  • Are on-site bathrooms, a small office, or a staff break area required?


2. Review the typical size of retailers in your industry. Research the square footage of your competitors and find out the average store size for retailers in your category.

3. Work with an architect or interior designer. In developing your store layout, it is helpful to recruit the help of an industry professional  who can bring your store layout to life.

4. Know your budget. Only get retail space that you can comfortably afford. Consider the impact of your lease on your bottom line. One way to keep your rent costs in check is to compute your target rent based on the percentage of sales.


How to Calculate Retail Space Using Sales per Square Foot

To calculate a realistic retail space size for business revenue, you can also use this computation:

Gross Sales Volume ÷ Sales per Square Foot = Size of Selling Space


For example, Sarah runs a women’s athletic clothing store with a gross sales volume of $275,000 annually. Market data for clothing retail tells her that a clothing store’s average sales per square foot is $100. With these numbers in hand, Sarah would divide $275,000 by $100 to determine the size of her selling space which is 2,750 square feet.

While there are many factors to consider in leasing retail space, calculating the size of your selling space is a quantitative place to start. In addition to selecting a space that will allow your business to be profitable, there is also the conundrum of a space feeling too large and uninviting for customers or too small and cramped for customers to shop.


5 Features every retail space needs

When shopping for your next retail space, it’s easy to fall in love with a particular location or space feature, like a fun part of downtown or an original brick interior. Like any business decision, selecting a retail space requires you to consider the most optimal space for your business. Consider these five features and how they relate to your retail store before signing a lease.

small retail checkout counterFunctionality for Customers

What features of retail space will make your customer’s shopping experience more straightforward, pleasant, and enticing? For example, consider adding a display window, a checkout counter, styled shelves, or a well-designed lounge area. Features like free Wi-Fi, complimentary water while shopping, and other creative perks will add to the overall shopping experience for your customers. Continually adjusting and updating your offerings will keep the experience fresh and exciting.


Aesthetic Features

Aesthetic features include windows, product placement, wall color, and decor. Customers should feel comfortable and welcome in your store, and you should feel comfortable being there all day. Remember that elements such as the layout, the windows, the paint, the trim, and the lighting all affect your overall decor. To add your personal brand touch, talk to your landlord about improvements you wish to make, such as new paint or repairs.

The Floor Plan

Don’t sleep on your floor plan. Ahead of time, work with your landlord to make sure you customize the space as needed for your business. Understand that to create a good flow throughout your store; you may need to make several adjustments along the way. As required, account for bathrooms, fitting rooms, stock rooms, or other features. A positive flow from entrance to checkout will encourage your shoppers to browse and buy.

Location, Location, Location

As with any lease or real estate investment, location is always one of the most critical aspects.

When considering a particular location, ask these questions:

  • Are you near other retail stores that will help attract your customer base?
  • Is it in a high-traffic or high-visibility area?
  • Is there plenty of parking near your store?
  • Can customers easily see and access your store entrance?


If you answer yes to these questions, then you have found a great retail location. Get leasing quotes for several locations to help you decide which location gives you the best space for your budget.

Landscaping and Outdoors

On the topic of location, understand that the outdoor area surrounding a retail building is just as important as the interior. Customers will enter through the outdoor area, contributing to your store’s overall vibe and appeal. Will this area have a great first impression on your customers? Elements such as mature trees and shrubs, well-maintained flowers, clean trash cans, and accessible sidewalks will all play a role in your customer’s experience. Before signing a retail lease, always ask your landlord whether landscaping services are included in the lease contract.


6 Advantages of small retail spaces for rent

Contrary to popular belief around e-commerce, online transactions are only a stepping stone for retail stores, which help online brands reach new heights through accessibility and brand exposure. Small retail spaces and small-format stores are gaining particular popularity as of late. Retailers are narrowing their focus on smaller spaces with strategic locations, averaging 3,100 square feet or less.

There are several advantages to small retail spaces. These include:

  • Lower costs: Since you pay the price per square foot in commercial leases, a smaller amount of square footage equals a smaller monthly rent bill.
  • Less maintenance & utilities: A small store requires smaller square footage, which leads to less maintenance and lower utility usage.
  • Personal marketing: With the intimate feel of a smaller retail space, small shops can capitalize on unique marketing events to enhance personal connections between the store and customers.
  • Location: Strategic placement of small shops in the proper neighborhoods allows greater customer access.
  • More flexibility: Small retail spaces are easier to renovate and transform. Not only does it cost less to renovate less square footage, but you can also make simple changes that will transform your small retail space.
  • Customer service: With a smaller footprint and a neighborhood feel, smaller shops can better know their customers and develop greater rapport with them over time.


Tips for finding the right retail space for rent

Once you’ve considered the advantages of small retail space and calculated how much square footage you’ll need, you need to find the space. It’s best practice to work with a professional leasing agent  to help you identify a favorable lease. You can also follow these tips for finding the right retail space to rent for your business.

1. Start Your Search Early

As a general rule of thumb, start scouting out available retail space six months to one year before your planned move-in date. This strategy is best for several key reasons. First, it can take months to find a suitable space. Most commercial leases are multiple-year agreements, so availability can be intermittent. Second, negotiating the lease terms and finalizing the documents can be a lengthy process in some cases. Finally, if renovations and upgrades need to be made, you’ll want plenty of time to work with contractors to complete the work before your move-in date.

2. Consider Other Businesses

You’ve likely scouted locations and determined a general geographic area in which you’d like to rent retail space. If you reside in a highly competitive industry, you will want to consider if there are other competitor businesses in the same area. Sometimes, the presence of competitors can be complementary to your business–it all depends on the depth of the market for your industry in the area in question.

3. The Neighborhood

Look beyond the interior features of a space and consider if the building is in a prime location for your business. While the interior is also important, the neighborhood can often be a defining factor for your customers.  Be thorough and delve deeply into the neighborhood and surrounding areas. Talk to other business owners in the area and learn as much as possible about the traffic patterns, typical foot traffic, etc.

4. Be Patient

Like any business decision, selecting the right retail space is key to your business’ success. Don’t rush into a lease on the first available space. Consider several options and negotiate lease terms so that the arrangement benefits your business. Take your time, seek professional advice from a commercial broker, and choose wisely.


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