How Much Does It Cost to Rent a Retail Space?

Whether you’re just starting out or looking for a new, larger space as you grow, there are certain factors to consider when looking for the ideal location to rent a retail space. From the average cost of renting in your area and rent-to-income ratios to the average amount spent in your industry, the following are some of the ways to determine how much it will cost to rent a retail space that is perfect for your business.

The Average Cost to Rent a Retail Space in Your Area

The first aspect that influences the total cost of renting a retail space is the average cost of spaces nearby. As you can imagine, rent will vary largely. The cost to rent varies between cities and between areas within cities. The rent will also differ between industries.

In addition to looking at local spaces for rent, try to speak with local business owners. Also, ask a real estate broker about the average cost and the different factors influencing those prices. It’s also important to confirm whether a price listed is by square foot per year or per month. You don’t want to end up with an unpleasant surprise that far exceeds your initial calculations.

Location is Vital to Rent a Retail Space Successfully

Different types of buildings in different areas can come with very different costs. For example, if you’re looking for a nice area to rent in Jackson, Mississippi, you may end up paying as much as $28 per square foot per year. A more modest retail space in a less popular area could be as little as $10 SF/YR. For a space of around 1,500 square feet, this would translate to anywhere from $15,000 to $42,000 per year or $1,250 to $3,500 per month.

If an area seems too expensive at first, consider how the expense might be worth it. If you can attract enough customers and earn enough to make it profitable, it may still be a good choice.

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The Cost of Common Area Maintenance, Taxes, and Insurance Premiums

In addition to the rent amount listed, consider other expenses that will add to that monthly or yearly cost. For instance, your landlord may charge you for utilities, insurance premiums that they currently pay, property tax, and what is known as “common area maintenance”. This entails maintenance of all rented property including the facility, parking lot, side lot, or any other designated common area.

Keep in mind that these costs could be steep and potentially even equal the rental price.

Use Unit Economics to Determine What You Can Afford

Considering all the potential costs of moving to a retail space, it’s important to figure out how much you can actually afford before settling on the ideal location. You may have enough to cover the costs of renting and all other expenses piled on. Still, ask yourself if the move to the new location will be profitable or hold you back in the long term. One of the best ways to gauge the affordability of a retail space is to look at unit economics. What you sell and how much revenue you earn or are projected to earn could also factor into your decision.

Rent a Retail Space with Customers in Mind

As an example, you might sell a product that goes for around $15, but it costs you around $8 to manufacture and sell. This puts you at a profit margin of around 53 percent. Use the cost per acquisition of a customer to help gauge the affordability of a retail space. Let’s say that it costs around $50 to acquire a customer with all costs of the product, marketing, and sales. If that customer spends an average of around $80 each time they buy from you at your location, that’s a $30 profit per customer.

Find the amount of predicted revenue that you’re likely to make every month. Then, use this to calculate the total amount that the retail space would cost you comparatively. If your monthly income is around $60,000, for instance, and your rent per month is approximately $10,000, that means that rent costs about 16.6 percent of your monthly revenue.

Consider Potential Changes in Revenue and Costs

Depending on your situation, you may find that your monthly or yearly revenue fluctuates. Consider the patterns that you’re used to seeing or the projected growth that you’re expecting to experience. Use this information to help you determine whether moving to a new retail location is the right decision. You may find that it’s best to keep shopping around for another prospective location. Or, delay the move until you can gather enough funds and resources to make the transition as comfortable as possible.

Also, consider different costs based on your industry. According to Austin Tenant Advisors, retailers should limit rent to around 5 to 10 percent of their gross annual income. A law firm may be able to afford higher rental rates of around 15 percent of their yearly revenue.

Every location and every business will be different. Take the time to determine which location is best. Consider your business’s specific needs and what you can actually afford. If you find that moving to a new location will only enable you to break even without seeing any real profit, consider looking elsewhere. Or, allow your company to grow before making the big move. You might be excited to conquer new ground and open a new location to attract more customers. However, it may require some time and thorough research before you can realize that dream.

If you would like some help finding the right retail space for your business, contact Speed Commercial Real Estate. We’ll work with you to locate the right property for your company, whether you’re a new business looking for your first physical store or a well-established company scouting a new location.

Entrepreneurs Wonder: How Much Does it Cost to Rent an Office?

If you’re wondering how much it costs to lease or rent an office space in Jackson, there is no short answer. The cost of commercial office space for rent is based on several factors like office size, neighborhood, and architecture. 

This article is for entrepreneurs and small business professionals on the quest for quality office space for rent. If you’re starting your own business, opening a satellite office in Jackson, or taking your homegrown business from the garage into an office for the first time, you’re in the right place!

Here, we’ll cover the various details of office spaces that will affect your cost to lease them. From square footage to architecture, we’ll explain these key features and propose questions you should consider along the way.

Now, know that office space in Jackson, MS, is some of the nation’s cheapest. Should you have questions beyond this article’s scope, reach out to the team at Speed Commercial Real Estate

Commercial Office Space — Size Matters!

It makes sense that square footage — we’re talking about the actual, usable floor space — will directly impact the cost to rent an office. All other factors aside, more room costs more money. Generally speaking, the rent at a 1,000 square foot office will be half the price of a 2,000 square foot office in the same building on the same floor. 

However, the price per square foot varies greatly from city to city, block to block, and even from one building to the next! So, what else affects the price of office space for rent? You’ve heard that old real estate adage before: location is everything.

Location Affects the Cost to Rent an Office Space

You’re probably aware that office space in some cities is incredibly expensive.

  • Across the nation, the office space costs anywhere from $10 to $55 per square foot.
  • New York City, Los Angeles and San Francisco all have a reputation for expensive office space. 

At the time of writing (August 2020), respectable office space in D.C. might cost $50.00 per square foot. In Miami, the same space might cost $33.00, and in Boston $22.00. Jackson is known for extremely affordable office space, sometimes as low as $5 or $10 per square foot! 

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A Closer Look at Location

There is far more to a location than the city and state, and this rabbit hole goes much deeper. The local amenities, neighborhoods, and noise levels can have a lot to do with office space costs. If you’re shopping for office space to lease, make a list of key features and amenities.

We realize that every organization is different, but depending on your business, you may need:

  • Easy access to highways, airports or shipping infrastructure
  • Quick access to a post office box, or cargo company
  • Access to either unskilled labor or an educated workforce 
  • Public transportation systems for employees or customers
  • Parking for your team or your customers
  • High-speed internet access
  • Wheelchair accessibility
  • Appealing landscaping
  • Easy access to office supplies

And let’s not forget that a gorgeous view from your office is worth something, too!

Naturally, an online-only “eBay store” can operate in a back room. A brick-and-mortar operation that requires foot traffic (like a boutique or salon) will need quality frontage with curb appeal and options for signage. 

The safety of a neighborhood is also crucial for some businesses. If your business model requires you to keep a lot of cash on hand, store credit card information, or maintain expensive equipment, be sure to spend some quality time — in person — in the neighborhood.

Choosing the right community for a retail operation, in particular, will require boots on the ground.

  • For the sake of your employee productivity and customer experience, you should also consider how much natural sunlight a commercial space gets, and the noise pollution happening around the office.
  • We all know that healthy workers are productive, and natural sunlight has been proven to boost employee productivity in dozens of studies.
  • We also know that noise can reduce output and cause good employees to leave.

As you can imagine, the loft space above a noisy factory might be economical, but will you want to work there? If you leave the office every day with a tremendous headache, will you renew the lease next year? Probably not. 

So you see, details like this have a considerable impact on your cost to rent an office — and the cheapest office isn’t always the best choice.

On Neighbors & Neighborhoods

The neighborhood you choose to do business in says a lot about your organization.

When browsing for Jackson office space online, ask yourself:

  • Should your office be found in an industrial neighborhood or the swanky streets downtown
  • How close do you need to be to suppliers?
  • Does foot traffic matter to your business plan? 
  • How close are your competitors?

Convenience plays a role in the price of office space, too. High-end, marble-floored offices near the courthouse are appealing to attorneys and are priced accordingly. Speaking of marble floors, let’s move on to those kinds of architectural details that can affect the price to rent an office. 

Lastly, Consider Architecture, Design, and Historic Buildings

Sparkling new commercial office space will undoubtedly cost more to lease than the same square footage in a run-down building.

There are benefits to leasing a new office space.

  • For instance, you can be confident that the electrical system can handle dozens of servers, and that the HVAC system can keep them cool.
  • You can also trust that this commercial building was built according to Mississippi safety codes — meaning safe stairwells for your staff and quality roofing over your inventory.  

But there’s something to be said for recently renovated historical buildings, too.

  • Once remodeled and brought up to code, historic office buildings can lend unparalleled ambiance and dignity to your office.
  • If you work in financials, insurance, or the legal profession, what could be better than a beautifully renovated historic office space? 

Ultimately, every small business has a unique angle, and so does every office space for rent. The perfect office will help you attract the right staff and the best customers. Whether you need a high-tech facility or a cozy back office, reach out to Speed Commercial Real Estate today

Related Reading & Resources:

Priceithere.com: How Much Does it Cost to Rent Office Space?

Marketwatch.com: Here’s How Much Your Company Pays to Rent Office Space

What Dictates Commercial Rent Prices?

Realizing a return on investment (ROI) is a priority for every entrepreneur, and the same applies to those who invest in commercial real estate. If you want to invest effectively, you need to understand the current commercial rent prices and the future worth of commercial properties. This applies whether you are considering an office building, warehouse, multifamily property, commercial shopping center, retail space, or any other type of commercial property.

Such insight will help you maximize your returns by opting for the right property. The factors that affect commercial rent prices lie in three major categories, namely:

  • Economic Factors.
  • Location Factors.
  • Property Factors.

Each of the aspects above has a significant impact on the prices of commercial buildings. Here is a breakdown of every category.

Economic Factors in Commercial Rent Prices

a) Interest Rates

Without a doubt, interest rates are the most significant driver of commercial rent prices. This is because those who invest in real estate use leverage or other people’s money to buy property. Interest rates here refers to the cost of credit. As such, when interest rates fall, credit becomes cheaper. Then, more funds flow into capital improvements and commercial real estate since the yields are higher due to rising property values.

On the other hand, high interest rates lower property values as a result of declining yields from the high cost of financing. In such situations, fewer people are willing to invest in commercial buildings. This causes the demand for the same to fall and, subsequently, the prices.

b) Wage Growth

The most recent and highest annual growth rate in three years is the wage growth of 2.3% by the end of 2018. Growing wages allow individuals/families to have more disposable income, which can encourage them to invest in commercial property. Wages are critical indicators of how cheap or expensive commercial property is at any given point.

Location Factors in Commercial Rent Prices

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a) Transport

The quality of transport systems has a direct impact on the valuation of commercial property. That means that acquiring commercial property in an area with a sufficient supply of transportation networks will attract higher yields. Also, in most cases, commercial buildings within a transport hub are in high demand. Potential investors are focusing on capitalizing on the increased foot traffic in such areas. That, in turn, causes the prices of commercial properties in such locations to surge upwards.

Improving accessibility to commercial property centers is possible through the development of transport networks. That is why the prices of existing and new commercial buildings rise follows the improvement of roads serving such properties.

b) Population Growth

Education levels, births, age distribution, and migration are some of the factors that contribute to population growth in a specific region. For example, the demand for high-end restaurants and retail may be high in an area that is experiencing an increase in the number of high-tech jobs.

On the other hand, there will most likely be a surge in demand for assisted living and retirement facilities within a submarket with an aging population.

Property Factors in Commercial Rent Prices

a) Location

Talking about commercial real estate prices without mentioning the location factor is next to impossible. The reason for this is that different locations impact the desirability of commercial buildings. This, in turn, affect the prices of such property. Some of the critical considerations, in this case, include zoning for your nature of business and the location’s accessibility for your target customers as well as potential workers.

A characteristic example, in this case, is a traditional retail property sitting in an area with multiple apartments and where there are few restaurants to serve the residents. Hotel operators will be competing for that commercial space, which will increase the price of the latter.

b) Potential for Development

The possibility of developing a particular commercial building further can push its price upwards as well. That is because the highest-and-best-use for such property in the future may be different from the initial design. For instance, the demand for multifamily residential property is growing in many real estate markets.

As a result, you are likely to see the redevelopment of obsolete shopping centers into higher density residential housing and the conversion of warehouses into live-work spaces.

Other Factors in Commercial Rent Prices

a) Credit Scores/Financing/Rates

Low-interest rates do not suggest that every borrower can access the same when buying or leasing commercial property. The creditworthiness and credit history of an individual or business are worth considering in such situations. If your credit ratings are low, you will most likely pay higher interest rates, which means that you’ll end up paying more in the long-term.

That ultimately makes purchasing commercial property more expensive.

b) Sale Or Leasing Method

The way someone chooses to sell or lease their commercial property will affect the overall price of such property. Additionally, the time and effort it takes to promote a specific commercial property will impact its price. Some of the approaches used to sell or lease properties include trades, auctions, leaseback, or exchanges – each of which come with their own unique costs.

c) The Urgency to Sell Or Rent Property

The speed with which a property owner wants to sell an asset or find a tenant will dictate commercial rent prices, too. For example, if a property is taking too long to offload, its owner can decide to take a lower offer to speed up the sale. If there is no urgency to sell or lease a particular commercial building, one may opt to hold out and wait until they find a match for their valuation.

If you’re interested in renting a commercial property for your needs, reach out to us. We’re happy to help you find what you need.