Phase III Topics
You might be thinking…
I’m touring available retail spaces but not exactly sure what I need or what my space should look like. What questions should I ask myself and/or my broker?
Reviewing the existing conditions of the physical space and the preliminary transactional issues following in-person tours is crucial. Refer to your Search Criteria from Phase I of this road map. Be sure the places you have toured align with what you laid out in your criteria and priorities for your business.
Terms to familiarize yourself with
Landlord & Building Considerations
Is this a single-use or mixed-use building?
As noted previously, a building with retail on the first floor and apartments or office space above is called a “mixed-use” building. While this type of space offers a built-in customer base, it may come with some physical constraints. On the other hand, a single-use or stand-alone retail building might offer you more flexibility in what you can do in the space.
What type of landlord owns the property (e.g., family office, institutional, non-profit, university) and what are their motivations for leasing the space?
Is the rent from this space a significant portion of the income from the real estate, or is the retail premises a small portion of the overall project square footage?
Does the landlord see a retail use as an amenity or special benefit to the office or apartment tenants upstairs?
Is the building part of a broader neighborhood-scale economic development strategy?
Is the landlord a good partner (e.g., did they treat their tenants fairly during the pandemic)? Are they meaningfully involved in their community?
Are people in the neighborhood or former tenants able to share a positive reference for them?
Is the landlord’s motivation purely economic? Is it to provide an amenity to their building’s other tenants in order to drive up rent? Or is the landlord’s goal to enhance the overall value to the neighborhood/community?
Physical Conditions
- Does the space meet your SF needs, including storage and back-of-house needs?
- Determine if the leased premises is being quoted as Usable or Rentable square feet . See the Glossary for definitions of these terms and how they relate to the idea of Building Load Factor.
- What business previously occupied the space? Or is this new construction?
- If previously occupied, how long was the former tenant in business at the space?
Is the space suitable as-is, or does it need improvements? Especially in an existing space, consider inspecting the following (with a contractor):
- Structure (roof, floors, walls) — are there any repairs needed now or expected in the next few years?
- Mechanical/Electrical/Plumbing (MEP) — when were these systems installed or last upgraded or serviced?
- Is there infrastructure and equipment in place to allow for full grease cooking (exhaust and grease waste system)? See Type I Kitchen Exhaust vs. Type II Kitchen ExhaustType II Kitchen Exhaust in the glossary.
- Ask the landlord where trash, recycling, and composting are stored and how they require it be removed from the space.
- Similarly, ask about loading: Is there a loading dock? If not, will there be rear loading access or will goods need to be front-loaded from the street?
- While these seem like small issues, they may have a real impact on the operations of your business.
- What is the parking situation like? Clarify if there is available vehicular parking spaces dedicated to retail customers, or if parking spaces are available for use by the whole building (“common parking”).
- Ask about staff parking.
- What about bike parking? This is particularly important in dense urban neighborhoods.
- Is it clear where you can install retail signage on the building? Ask the landlord to provide clarity on what is permitted and share any signage plans.
- Ask if there are steps that must be taken with the city/town prior to signage installation (many municipalities have rules and regulations on retail signage).
- What is the parking situation like? Clarify if there is available vehicular parking spaces dedicated to retail customers, or if parking spaces are available for use by the whole building (“common parking”).
- Ask about staff parking.
- What about bike parking? This is particularly important in dense urban neighborhoods.
- Does the space meet your SF needs, including storage and back-of-house needs?
- Determine if the leased premises is being quoted as Usable or Rentable square feet . See the Glossary for definitions of these terms and how they relate to the idea of Building Load Factor.
- What business previously occupied the space? Or is this new construction?
- If previously occupied, how long was the former tenant in business at the space?
Is the space suitable as-is, or does it need improvements? Especially in an existing space, consider inspecting the following (with a contractor):
- Structure (roof, floors, walls) — are there any repairs needed now or expected in the next few years?
- Mechanical/Electrical/Plumbing (MEP) — when were these systems installed or last upgraded or serviced?
- Is there infrastructure and equipment in place to allow for full grease cooking (exhaust and grease waste system)? See Type I Kitchen Exhaust vs. Type II Kitchen ExhaustType II Kitchen Exhaust in the glossary.
- Ask the landlord where trash, recycling, and composting are stored and how they require it be removed from the space.
- Similarly, ask about loading: Is there a loading dock? If not, will there be rear loading access or will goods need to be front-loaded from the street?
- While these seem like small issues, they may have a real impact on the operations of your business.
- What is the parking situation like? Clarify if there is available vehicular parking spaces dedicated to retail customers, or if parking spaces are available for use by the whole building (“common parking”).
- Ask about staff parking.
- What about bike parking? This is particularly important in dense urban neighborhoods.
- Is it clear where you can install retail signage on the building? Ask the landlord to provide clarity on what is permitted and share any signage plans.
- Ask if there are steps that must be taken with the city/town prior to signage installation (many municipalities have rules and regulations on retail signage).
- What is the parking situation like? Clarify if there is available vehicular parking spaces dedicated to retail customers, or if parking spaces are available for use by the whole building (“common parking”).
- Ask about staff parking.
- What about bike parking? This is particularly important in dense urban neighborhoods.
Labor Requirements
Does the building have Union Labor Requirements or Labor Harmony agreements allowing for union and non-union contractors to work in the same building?
This is most relevant in newly constructed buildings where you would be building out the entire interior retail space, but it can impact costs and timing associated with tenant improvements in all environments.
Does the building have Union Labor Requirements or Labor Harmony agreements allowing for union and non-union contractors to work in the same building?
This is most relevant in newly constructed buildings where you would be building out the entire interior retail space, but it can impact costs and timing associated with tenant improvements in all environments.
Economics
What is the base rent for the space on an annual basis?
- Break it down by square footage to easily compare it to other spaces. It is also helpful to calculate it for planning and budgeting purposes.
What are real estate taxes, Common Area Maintenance (CAM)Common Area Maintenance (CAM) and insurance charges for the space?
- These costs are in addition to base rent, which are often referred to collectively as the “net charges” or “nets.”
Is there any Percentage Rent or other hybrid rent structure suggested?
Will the landlord provide a Tenant Improvements Allowance (TIA) to help with renovation costs?
What is the base rent for the space on an annual basis?
- Break it down by square footage to easily compare it to other spaces. It is also helpful to calculate it for planning and budgeting purposes.
What are real estate taxes, Common Area Maintenance (CAM)Common Area Maintenance (CAM) and insurance charges for the space?
- These costs are in addition to base rent, which are often referred to collectively as the “net charges” or “nets.”
Is there any Percentage Rent or other hybrid rent structure suggested?
Will the landlord provide a Tenant Improvements Allowance (TIA) to help with renovation costs?
Is there a free rent or Rent Abatement period for design, permitting, build-out and pre-opening?
- This may vary depending on the landlord and property. Smaller landlords who rely on the rental income to pay their commercial mortgage often have a harder time extending lengthy free-rent periods compared to larger landlords with more complex debt structures less linked to retail rent cash flow.
What type of lease term is being offered?
- Short lease terms are typically 1-5 years in duration and may or may not have option periods.
- Long lease terms are typically 5-10 years and usually include 5-year option period(s).
Is there a free rent or Rent Abatement period for design, permitting, build-out and pre-opening?
- This may vary depending on the landlord and property. Smaller landlords who rely on the rental income to pay their commercial mortgage often have a harder time extending lengthy free-rent periods compared to larger landlords with more complex debt structures less linked to retail rent cash flow.
What type of lease term is being offered?
- Short lease terms are typically 1-5 years in duration and may or may not have option periods.
- Long lease terms are typically 5-10 years and usually include 5-year option period(s).
Schedule
Refer to your schedule from Phase I of this Roadmap to make sure it aligns with the timing of these opportunities.
Permits/Licenses
Permits/Licenses
Is the space zoned for your use or are there any restrictions for specific uses?
- Each municipality will have publicly accessible zoning maps available online, but they can be difficult to decipher — ask permitting attorneys or other trusted sources to review; never assume your use is permitted.
- If zoning does not allow for a use or the use is “conditional” (i.e. requires further approvals from the City) you can typically apply for a Special Permit or Variance, which requires additional permission from the City to allow the use (like a restaurant in a former retail space). This process can take months and often requires a public process with added costs and complexity.
Is the space zoned for your use or are there any restrictions for specific uses?
- Each municipality will have publicly accessible zoning maps available online, but they can be difficult to decipher — ask permitting attorneys or other trusted sources to review; never assume your use is permitted.
- If zoning does not allow for a use or the use is “conditional” (i.e. requires further approvals from the City) you can typically apply for a Special Permit or Variance, which requires additional permission from the City to allow the use (like a restaurant in a former retail space). This process can take months and often requires a public process with added costs and complexity.
What licenses, permits, or approvals do you need to open your business in the space?
- Health permit and CV (Common Victualler) license for food service
- Liquor or beer/wine license for alcohol service
- Entertainment permit for music or live performance
- Building permit for improvements to the space, etc.
- Signage approvals/licenses
- Outdoor seating approvals (if on public land)
What licenses, permits, or approvals do you need to open your business in the space?
- Health permit and CV (Common Victualler) license for food service
- Liquor or beer/wine license for alcohol service
- Entertainment permit for music or live performance
- Building permit for improvements to the space, etc.
- Signage approvals/licenses
- Outdoor seating approvals (if on public land)
