Opening a shop or service point in a shopping centre is a great opportunity for success, but also a huge financial risk. This decision means higher rents, additional operating fees, and entering into a legal relationship with a powerful corporate landlord. Based on our many years of experience, we advise you on how to rent a commercial space in a gallery thoughtfully and what to watch out for during contract negotiations.
💡 Key takeaways
- Not every business is suited for a shopping gallery. Before you lease a retail space, analyse whether the high fixed costs will pay off in terms of access to a sufficiently large number of accidental customers.
- The owner of the shopping centre is extremely difficult to negotiate with, as their interests are represented by a team of lawyers. It is worth engaging your own legal expert for the talks.
- The lease agreement should be as flexible as possible. Avoid multi-year, unbreakable contracts. Try to negotiate an early termination clause, rent-free periods, or funding for property adaptations.
Signing a multi-year lease for a retail unit in a shopping centre without break clauses is a business trap. When a shop becomes unprofitable, the tenant is forced to subsidise it from their own pocket for the remainder of the contract. Landlords rarely let go in such matters.
How to rent a retail unit in a shopping centre: An insider's guide
Is renting a space in a gallery a good idea?
While having a spot in a prestigious location sounds promising, it requires thorough analysis. Costs in a gallery rarely stop at the rent – there are enormous additional costs involved (security, joint marketing, management, air conditioning). Before you start your search, ask yourself a few key questions.
Financial readiness and resilience to competition
Consider whether your clothing store can withstand the pressure from neighbouring chain stores (like H&M or Zara). A shopping centre offers a large customer flow, but at the same time, it pits us against the strongest possible competition on every square metre. The first artisanal ice cream parlour in the centre has enormous potential, but a third supplement shop might simply not generate adequate turnover.
Does your business really need a gallery?
Customers of hair salons or tailor and bespoke suit shops often travel across town to a specific service provider. Locating such businesses in the most expensive shopping centre – where we overpay for random customer traffic (so-called "footfall"), which we don't actually need – is economically misguided.
How to choose the right gallery and venue?
"Biggest" doesn't always mean "best". A smaller, local shopping park next to a hypermarket can often be a better environment for a neighbourhood bakery with a cafe. In large complexes, the floor also matters (always cheaper than the ground floor) and zoning – centres usually group similar services (e.g., a separate jewellery section, a separate clothing section, a designated food court).
How to obtain and analyse offers?
The simplest method is direct contact with the administration of the given property, the numbers for which can easily be found on the internet. A good alternative, especially when entering wider markets, is to hire professional commercial intermediaries (commercial real estate brokers), who can point out the hidden advantages and disadvantages of a given location.
Legal and business negotiations – what to watch out for?
The agreements proposed by gallery managers are constructed by their powerful legal departments. By nature, they are extremely one-sided and favour the landlord. Therefore, you should invite an experienced lawyer to the negotiating table (or at least for "backseat" consultation). What should you pay particular attention to?
Rental period and notice periods
The gallery standard is fixed-term contracts (e.g. 5 or 10 years). These are rigid contracts. If the business turns out to be a flop after half a year, you will still be obliged to pay for the following years. Therefore, the key is to negotiate shorter periods with the option of extension or hard early termination clauses (so-called break options).
Rent indexation
Rents are indexed (most often by market inflation indices) usually once a year. Particular attention should be paid to which indexation is carried out, so that year-on-year fees do not drastically disrupt your business plan.
What can a tenant negotiate from a gallery? (Rent-free)
Landlords want their properties to be fully let. If they see you as a prospective tenant, they will often agree to concessions. The most common of these include:
- Rent-free holidays Exemption from fees (partial or total) in the first few months, allowing a new business to get on its feet and the tenant to amortise renovation costs.
- Fit-out contribution The gallery contributes a specified sum of cash or materials for the outfitting and finishing of the premises, treating this as an upgrade to its own building's standard.
- Marketing consent: Additional advertising media in common areas or on the building's facade, often exempt from service charges in the first year.