How to rent a premises in a shopping mall?

Although times are currently uncertain, and perhaps even turbulent, more and more entrepreneurs are opening businesses. An attractive place to locate one may be shopping malls - both larger ones, such as Złote Tarasy in Warsaw or Galeria Krakowska in Krakow, but also smaller ones, such as an extensive retail park with Biedronka or Kaufland, whose building, in addition to the main hall of the store, is several premises where you can usually find smaller businesses, such as a flower shop, pharmacy, bakery, e-cigarette shop, telephone commission or other similar places. In this article, based on our 14 years of experience in renting such premises, we provide some tips on how to rent premises in a shopping mall, how to open a store in a mall, what a lease agreement for premises in a shopping mall should look like and much more.

How to rent a premises in a shopping mall – the most important questions

The answer to the title question is as simple as it is complicated. You need to rent a premises by finding an appropriate offer and concluding a contract - this is the simple part. However, before we move on to it, we should perform a thorough analysis and answer the basic questions about our business, which are presented below. Then, once we get through them, we need to analyze what type of gallery and which particular one will be attractive to us. Finally, you should consider appropriately negotiating business terms within the framework of an extremely complicated lease agreement. This is not a simple deal, the fate of hundreds of thousands, and often several million zlotys, is decided here. So, going in order:

Should I rent a space in a shopping mall?

Yes – but only when we actually need it. It should be remembered that although having a place in a shopping mall, where thousands of people pass by every day, is undoubtedly encouraging from a marketing perspective, it also involves various requirements that must be taken into account. From the strictly economic ones, i.e. the rent (often several times) higher than in other places. Additional fees also count - from security, through joint marketing, to purely operational ones - such as heating and air conditioning. Additional obligations imposed on tenants by the landlord, which are usually absent in other places, are also important. However, they often significantly contribute to increasing the commercial attractiveness of the premises. Another need is a thorough legal analysis and the need to negotiate a reasonable lease agreement for premises in a shopping mall - after all, the landlord is usually a professional company with an organized legal department, so the contracting conditions are often unequal. Therefore, you should carefully analyze your needs and possibilities, as well as your economic balance - after all, if you sign a lease agreement for premises in a shopping mall that you will not be able to fulfill, you may quickly fall into a debt spiral. And from our many years of experience (including procedural experience), we can tell you with full responsibility that large companies renting premises in shopping malls do not forgive their receivables too easily. Therefore, it is worth answering the following questions:

Is our business ready for this?

Let’s not kid ourselves – money is the key and fundamental issue. Renting premises in a shopping centre offers many opportunities, but it can often prove to be a tricky business. It is therefore important to consider whether locating your business in a shopping centre is economically viable, and whether the business itself is sufficiently established or promising to not only survive in a shopping centre but also generate a reasonable profit. Shopping centres are associated with a variety of shops – we can mention, first and foremost, categories such as: clothing shops, electronics shops, homeware shops, DIY shops, shoe shops, toy shops, fashion accessories shops, as well as chemists and popular bookshops. This does not, however, that other types of business have no place there – slightly less popular retail or service businesses also find their niche in shopping centres, such as wine shops, shops selling exotic foods, or truly multi-sector shops like the popular Pepco or Chinese supermarkets. An undeniable advantage, but also a disadvantage, of shopping centres is that businesses are far more visible to customers, meaning a good business has a better chance of success. On the other hand, however, the competition is fierce, so a start-up clothing shop may buckle under the pressure of leading brands that virtually monopolise the large shopping centres (Zara, H&M, etc.). Of course, this example can be applied to various sectors – a small bookshop may not be able to compete with Empik, or perhaps the opposite is true. However, if we are sole traders, we must seriously consider whether our business will survive such competition. It is therefore worth analysing whether a given business is already popular, well-established and ‘strong’ enough to find its place in a shopping centre, and just how large (and, at the same time, expensive) that space might be. It would therefore be sensible to research the local market (the shopping centre where we are considering renting premises) and assess whether our business would thrive there. A fourth pet shop in a given shopping centre could easily lose out to the competition, but on the other hand, the first ice-cream parlour has the potential to be a huge success.

Is our business suitable for a gallery? 

And so, we should smoothly move on to the next important point, which is the analysis of whether our business is even suitable for a shopping centre. Locating a business in a shopping centre involves additional problems and costs. If, for example, we run a clothing store that already has an established position in the market, a wide customer base, a network of suppliers, and a solid reputation, the natural step is to look for a location in a large shopping centre. This allows us to reach a larger group of potential customers and simple brand promotion, which in turn translates into profit. On the other hand, if we are planning to set up a hairdressing salon (or another similar beauty-focused establishment), it is worth considering finding a cheaper location outside the centre, which will not expose us to high costs at the beginning. Moreover, not every business is suitable for any shopping centre. Overly sophisticated restaurants or those that serve food that is difficult to eat "on the go" may often not succeed. It is not without reason that when we think of food in shopping centres, we primarily associate them with fast food, often eaten at plastic tables in a large hall. However, this is not a rule – by renting a suitable premises, one can also create a high-quality restaurant that will be popular among shopping centre customers. The only question is whether taking such a risk is justified. After all, one can find a slightly cheaper location outside the centre, while simultaneously tempting customers with the brand, food quality, and restaurant atmosphere.

Does our business need a gallery and the gallery needs our business?

And so we come to the final point of this analysis… Answering the above question should resolve any remaining doubts. Will there be demand for what we offer in the shopping centre? If so, meaning if the centre needs it, then this is very good news. The chances of business success, and therefore a solid profit, then increase. Does our business need a shopping centre? If not, then we should seriously consider whether the risks associated with introducing our shop/showroom to a shopping centre, and the associated costs, are necessary? If our business does not require access to large numbers of "accidental" customers, then exposing ourselves to high costs and obligations seems unnecessary. This is the case, for example, with companies selling exceptionally exclusive men's clothing – they are often aware that a customer looking for a good tailor-made suit will even travel to another city – and decide not to invest in unnecessarily expensive premises in shopping centres.

How to rent a premises in a shopping mall - choosing a mall and a premises

As noted in the introduction, there are various malls: from giants with dozens of premises, a cinema, a large grocery store and various possibilities to modest, "local" stores such as Kaufland, Lidl or Biedronka enriched with single commercial premises in one building. Therefore, when assessing whether our business will find economic and marketing success in a given location, various factors should be taken into account.

How to judge which gallery?

First and foremost, a thorough analysis of our capabilities and needs must be carried out. If at an earlier stage we determined that the nature of our business is suitable for a shopping gallery at all, then we need to assess which one. It is often worth analysing several locations of different sizes and characteristics – sometimes from a business point of view, a location in a large gallery does not exclude a location in a small, local one. As an example, consider the already mentioned ice cream parlour or bakery, where one can also sit down, buy a sweet bun or a sandwich, and drink coffee. These types of businesses are viable in both large galleries and small shopping centres, provided that the competition is not too high. However, a shop selling dresses for £2000 would look strange if located in an enlarged local supermarket. On the other hand, a bakery or confectioner's shop in a gallery does not necessarily have to earn more than in a cheaper location.

How to choose a venue?

The premises must primarily meet our needs. It cannot be too small, as then we will not be able to implement the basic business assumptions. It should also not be too large, as we must remember that each square metre of space can sometimes mean even several hundred more zlotys in costs per month. After assessing our needs, attention must also be paid to the location of a given premises within the gallery. While this is not a problem in smaller centres, as there are usually few premises and it is difficult to choose, it is of significant importance in the case of large galleries. There, businesses of a similar nature often locate near each other. It is often observed that the most popular clothing shops are located next to each other, the most luxurious shops are in the most prominent locations, and a gastronomic zone is almost always designated in a specific place. Therefore, the location of the premises is not insignificant. It is also a known practice for rent prices to vary depending on the location of the premises – those in the central part or near entrances may be more expensive than those located in less attractive, more distant locations. It is also always cheaper "on the upper floor".

How to get offers from landlords? How to determine which one is best?

There are many methods – here we will describe the two most basic. First and foremost, you can search on your own, and also post an advert on a relevant online portal or even a Facebook group. You can also contact the gallery owner yourself (details are usually available on the gallery's website or you can speak to the administrator in person). Afterwards, you just need to wait – offers will quickly appear at the provided email address. Choosing the best one is then up to the entrepreneur. However, if the questions posed above have been answered thoroughly, this should not be a problem. An alternative for those interested in the best premises is to hire professionals to conduct the search. In this regard, you can turn to real estate agents who, for a suitable fee, will take care of searching the market for premises that meet your needs, and will also advise on the best option.

How to rent a premises in a shopping mall - contract negotiations.

Next, after considering all the pros and cons and choosing a suitable premises, it's time to negotiate the agreement itself. As mentioned earlier in this article, the landlord is usually a large, professional company with extensive agreements, many clauses incomprehensible to a non-professional, and a team of lawyers ready to protect the landlord's interests excessively well. That is why a responsible approach to the matter by the tenant is so important. Commercial lease services can be quite complex, which is why an experienced lease agreement lawyer usually proves very helpful. Renting commercial premises or a unit in a shopping centre is a complex undertaking, often involving signing an agreement for several years. Therefore, your interests should be protected as broadly as possible. Given that the parties' negotiating positions are not equal in this regard, it is worth considering seeking the help of a lawyer experienced in business negotiations.

How to negotiate good conditions/agreement?

Before approaching the negotiating table, it is worth spending time preparing for the talks. It will be advisable to carefully analyze our business situation, prepare a cost balance and estimate the financial categories in which we can operate. We therefore recommend making a list of basic assumptions that we would like to include in the contract. It can also be divided into what "must" be included in the contract, what "is important but not crucial" and those requirements that are least important to us, although still desired by us. This will make it easier to negotiate and achieve your goals later. From our experiencethat it is worth engaging a lawyer in the process of negotiating a lease agreement, usually worth several hundred thousand zlotys. During the consultation, before starting talks with the landlord, a lawyer experienced in negotiations with shopping malls can advise which demands can be implemented. At a later stage, a knowledgeable lawyer will be able to make comments and amendments to the contract in a way that meets the client's expectations as best as possible.

What are the good conditions for renting a premises in a mall or shopping center today?

These are uncertain times. It is difficult to predict the development of markets and all the threats that may arise in the future. However, below we highlight key issues that are worth considering "for today". Lease term – landlords in shopping centres, wanting to primarily ensure the stability of their investment, a consistent appearance, as well as the availability of shops/services in the centre, often aim to sign long-term lease agreements. In today's times, when the economic, tax and financial situation is uncertain, signing such an agreement can have dire consequences – an unprofitable business may force us to "top up the business" monthly in order to pay off the obligations arising from the lease.

Unfortunately, we have clients who have had to sell off personal assets, sometimes even their homes, due to such agreements. It is therefore worthwhile to sign shorter agreements, which can be extended for further years if the tenant makes appropriate declarations for their extension. This is especially true for the first, second, or even third property. Termination of the agreement – for the same reasons, it is advisable to protect your interests by including circumstances in the agreement that allow the tenant to unilaterally terminate the agreement.

An example could be – as we once negotiated such a provision at the client's request – the possibility of unilateral termination of the contract in the event that Poland becomes involved in an armed conflict. Unlikely? An epidemic four years ago also seemed unlikely. It is therefore worth thoroughly analysing circumstances that might cause us to want to terminate the lease agreement with immediate effect, or to automatically receive a large rent discount.

While it should be remembered that the gallery will usually resist on these matters. Rent indexing – an indexing clause involves increasing rent along with the rise in inflation. In current times, when it is so high and constantly changing, wise drafting of indexing provisions is crucial. It is certain that the landlord will want to include it in the agreement, but it is worth drafting it in a way that is least severe and burdensome for the tenant.

What can a tenant get from the mall?

How to rent premises from a gallery? Most favourably – that is obvious. Below we present a few more typical provisions that are common and beneficial for the tenant in such business relationships. It is worth considering them when planning negotiations. Rent-free – this is a period for which the tenant is not obliged to pay rent. The landlord is aware of the challenges facing a new business, which is why many of them are often willing to waive rent for the first few months.

Example:

A newly opened shop in the shopping centre does not pay rent for the first two months, and for the following two months pays only 50%. During this time, it is able to keep costs down, which helps it ‘bounce back’ after incurring significant expenditure on refurbishment, setting up the shop and promoting it, so that in future it can easily meet its financial obligations to the landlord.

Contribution towards fitting out the premises – sometimes shopping centre owners are keen for a retail unit to be fitted out and trading as quickly as possible. In such situations, it’s not out of the question for them to co-finance the tenant’s investment by contributing a specific sum towards fitting out the rented premises. This is also a good promise of future profits for the centre. The right to display a logo on various surfaces – the external facade, a sign at the entrance, or a so-called pylon or totem.

What are the conditions for terminating the lease agreement for premises in the mall?

The answer to this question is not that simple. It should be noted at the outset that a separate entry is devoted to this topic on our blog, to which we refer those interested: "Lease agreement for premises in a shopping mall. TerminationThe method of terminating a lease agreement depends on whether it was concluded for a fixed term or an indefinite term. In the latter case, both the landlord and the tenant can terminate the lease, observing the contractual notice periods, and in their absence, statutory notice periods. However, if the lease term is fixed, which is most often the case, the tenant can only terminate the lease agreement in cases provided for in the agreement. Therefore, it is so important to negotiate favourable terms in this regard for the tenant. Many premises do not stand the test of time and one should not be overly optimistic from the outset.

If you are interested in renting premises in a shopping mall, retail park, shopping center or subsequent legal services for such a contract - We cordially invite you to contact our office. Based on our over 14 years of experience in this field, we provide fully comprehensive services, from contract negotiations, through support in searching for premises and business consulting.