Tips on finding retail space

[Kyle Mitchell]

Hey BP,

I have a very random question. I am in the process of opening a boutique fitness studio in the Anaheim Hills/Yorba Linda area and am having trouble finding available retail space. Other than LoopNet and driving the area's, does anyone have any other tips or websites to search for space? There is not much out there and I feel like if you don't know someone it's tough to find, any advice would be great.

Thanks,

Kyle Mitchell

[Damon DiPlacido]

Hi Kyle, 
I am a retail leasing broker in the Philadelphia market....I don't know local market, but want to ask you a few questions.  Are you using the free version of Loopnet or the paid subscription version? If the free version, you are not seeing all the listings. It's not cheap, but might be worth the investment of spending a few hundred dollars a month for it, and then cancel it. Also, does your boutique fitness studio have any particular requirements that make finding the right retail space challenging? For example, high clear span ceilings? Or Potential sound or noise issues? Also, you mentioned it's tough unless you know someone. On this point, have you given any thought to having a good retail leasing broker help you? The right broker can really open doors to locations. Good luck. -Damon

[Kyle Mitchell]

Thanks @Damon DiPlacido   I didn't know there was a free and paid version of Loopnet, I will definitely give that a try!  In your opinion what percentage of spaces are listed on the free vs paid? As far as requirements, there are no ceiling or sound issues but we do need a space that is a rectangle and is no smaller than 20x60.  We are looking between 1200-1800 sq ft.  We've tried going with a retail leasing broker and it hasn't been very good, maybe we just haven't found the right person yet.  I will keep searching on this front as well.  Any suggestions on how to find a GREAT leasing broker?  Thanks again!

[Mike L.]

Hi Kyle,

Just some terminology: you would be looking for a tenant representation ("tenant rep") broker to help you find space.

You can try a service like getdigsy.com, which pairs tenants up with brokers who can help.

Or you can call the real estate office of a company like CBRE or NAI Capital and the operator may be able to send your call to a broker who is hungry and hardworking.  

I'm going to make an assumption (feel free to correct me if I am wrong) that you are looking to open your first location for the fitness studio, so you are new to the industry.

The honest truth (and you may not like to hear this) is that most experienced brokers would not really want to work with a client who is opening their first location.  Reason being that tenant representation work is a LOT of work (researching spaces, giving property tours) with no guarantee of getting paid.  And many brokers especially don't want to do tenant representation for a business that is unproven.  Most tenant rep brokers will screen their tenants for business experience, cash in the bank, a business plan, etc.  They should be screening you to see how serious you are about opening the business.

And if they do find a location for you, if that is going to be your only location, then they only make a few thousand dollars' commission on the deal, without much likelihood of future business.

Successful tenant rep brokers in the retail world are typically running with a corporation or a local franchisee who wants to open several, or several dozen locations.  It doesn't make much financial sense for a broker to do tenant rep work for a brand new business, unless that business is backed by a lot of cash, with a strong plan to grow to many locations.  Brokers only have so much time in their day and they need to choose how to best spend it.  

A few years ago when I started out, I knew nothing about the business and chose to do some tenant rep work for independent businesses.  I spent weeks researching spaces, and giving tours, only to find out that the tenants ended up finding space on their own, so I didn't make a dime.  So while on your side you might think that brokers would be lining up to help you out, and that you should be able to find a great broker, please try to see it from their side, as well.  

To understand the economics of it: A broker might typically get paid 3% of the lease value for a 5 year lease; so if you rent a 1200 SF space for $2.00/SF, the calculation is:

1200 SF x $2.00/SF = $2400/mo * 60 mo = $144,000.  3% of that is $4,320.  The broker probably splits this 50% with the house, so he pockets about $2,200.  And while that might not seem like a bad paycheck, there is always the possibility that you may decide not to open the studio if you don't find anything to your liking, or you might find a space on your own.  Since you are typically not contractually bound to your tenant rep broker, the broker may not get paid at all.  So once you factor in that risk, the broker is probably thinking it doesn't make a whole lot of sense to take on that assignment.  Unless, like I said before, he is very hungry and hardworking (and likely very new to the business).

Hope this helpful to explain the business a little bit.

[Account Closed]

Hi Kyle,

Not sure if you already found space but I know someone who might be able to help you out. DM me if you are interested.

Thanks!

[Kyle Mitchell]

Thanks @Mike L.  This is actually our second location and we have a very strong package and business plan.  This would be our first location in this particular area though.  We were lucky with our first location and we were able to find a location on our own very quickly.  However, this second location has posed a challenge and there is very low inventory in the area we are searching for which is why I am looking for alternative resources to find this space.  I appreciate the feedback and help!

[Whit Ewen]

We have an area in Austin with zero inventory that everyone wants to be in.  In that area, often, prospective tenants benefit by networking with local businesses to find opportunities.  They look for businesses in trouble and either (less often) buy the business and take over the space and change to their concept or (more often) they hunt down and network with the landlords. 

[Kyle Mitchell]

thanks @Whit Ewen!