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?
The fundamental and fundamental issue is – let's be honest – money. Renting a premises in a shopping mall offers many opportunities, but sometimes it can also turn out to be tricky. Therefore, we should consider whether locating our business in a shopping mall is economically justified, and whether it is developed or promising enough to not only survive in a shopping mall, but also generate adequate profit.
Shopping malls are associated with a variety of stores - we can mention primarily such categories as: clothing stores, electronics stores, home furnishing stores, construction stores, footwear stores, toy stores, haberdashery stores, pharmacies or popular bookstores. This does not mean, however, that other types of business cannot be found there - slightly less popular sales or service businesses can also be found in shopping malls, such as wine and exotic food stores or truly multi-sector stores, such as the popular Pepco or Chinese supermarkets.
An undoubted advantage, but also a disadvantage, is that the business is much more exposed to the customer, so a good business has a greater chance of success. On the other hand, the competition is also huge, so a beginner clothing store may succumb to the pressure of leading brands that almost monopolize large shopping malls (Zara, H&M, etc.). Of course, this example can be applied to various industries - a small bookstore may not win against Empik, or maybe just the opposite. However, if we are individual entrepreneurs, we must seriously consider whether our business will survive such competition.
It is therefore worth analyzing whether a given business is already popular, developed and "strong" enough to find its place in a shopping mall and how large (and expensive). Therefore, it would be reasonable to examine the local market (the shopping mall where we are considering renting a premises) and assess whether our business will find its place there. The fourth pet store in a given mall may easily lose out to the competition, but on the other hand, the first ice cream parlor has the potential to be a great success.
Is our business suitable for a gallery?
And so we should smoothly move on to the next important point, i.e. the analysis of whether our business is suitable for a gallery at all. Locating a business in a shopping mall involves additional problems and costs.
For example, if we run a clothing store that already has an established position on the market, a wide customer base, a network of suppliers and a solid reputation, a natural step is to look for a place in a large shopping mall. This allows you to reach a larger group of potential customers and easily promote your brand, which in turn translates into profit.
On the other hand, if we are planning to set up a hairdressing salon (or another similar establishment focused on beauty), it is worth considering finding a cheaper premises outside the mall, which will not expose us to high costs at the beginning.
Moreover, not every business is suitable for any gallery. Restaurants that are too refined or those that serve food that is difficult to eat on the go may often fail to succeed. It is not without reason that we associate food in shopping malls mainly with fast food, often eaten at plastic tables in the great hall. However, this is not a rule - by renting appropriate premises, you can also create a high-quality restaurant that will be popular among the gallery's customers. The only question is whether taking such a risk is justified? After all, you can find a slightly cheaper place outside the mall, while tempting customers with the brand, quality of food and atmosphere of the restaurant.
Does our business need a gallery and the gallery needs our business?
And so we come to the last point of this analysis... By answering the above question, we should dispel any remaining doubts. Will there be demand in the gallery for what we offer? If so, and if the gallery needs it, this is very good news. This increases the chances of business success, and therefore a solid profit.
Does our business need a gallery? If not, you should seriously consider whether the risk associated with introducing our store/showroom into a shopping mall and the costs associated with it are necessary? If our business does not require access to large numbers of "random" customers, exposing ourselves to high costs and liabilities seems unnecessary. This is the case, for example, with companies selling exceptionally exclusive men's clothing - often, knowing that a customer looking for a good, tailored suit will go even to another city - they decide not to invest in unnecessarily expensive premises in shopping malls.
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 of all, we need to conduct a thorough analysis of our capabilities and needs. If at an earlier stage we determined that the nature of our business is suitable for a shopping mall, then we should assess which one.
It is often worth analyzing several places of different size and character - sometimes, from a business point of view, a place in a large gallery will not be mutually exclusive with a place in a small, local one. Let's take as an example the already mentioned ice cream parlor or bakery, where you can also sit down, buy a bun or a sandwich and drink coffee. This type of business can exist both in large shopping malls and small shopping centers, provided that there is not much competition. However, a shop selling dresses for PLN 2,000 would look strange, placed in an enlarged local supermarket. On the other hand, a bakery or confectionery shop in a shopping mall does not necessarily have to earn more than in a cheaper location.
How to choose a venue?
The premises must, above all, meet our needs. It cannot be too small, because then we will not be able to implement the basic business assumptions. It should not be too large, because it should be remembered that each square meter of space sometimes costs several hundred additional zlotys per month.
After assessing our needs, we should also pay attention to the location of the premises in the mall. While this is not a problem in smaller centers because there are usually few premises and it is difficult to choose, it is important in the case of large shopping malls. There, businesses of a similar nature are often located close to each other. You can often notice that the most popular clothing stores are located in their neighborhood, the most luxurious stores are located in the most exposed locations, and there is almost always a separate food court in a specific place. Therefore, the location of the premises is important.
It is also a well-known practice to price the rent differently depending on the location of the premises - those in the central part or at the entrances may be more expensive than those located in less attractive, more distant locations. It's always cheaper upstairs.
How to get offers from landlords? How to determine which one is best?
There are many ways - here we will describe the two most basic ones.
First of all, you can search on your own and post an ad on an appropriate website or even a Facebook group. You can also contact the gallery owner on your own (data are usually available on the gallery's website or you can talk to the administrator on site). Then just wait - the offers will appear quickly to the email address provided. The choice of the best one is left to the entrepreneur. However, if the questions posed above have been answered honestly, this should not be a problem.
An alternative for those interested in the best premises is to hire professionals to search for them. In this regard, you can contact real estate agents who, for an appropriate fee, will search the market for a property that meets your needs and will also advise you on choosing the best option.
How to rent a premises in a shopping mall - contract negotiations.
Next, after considering all the pros and cons and choosing the right premises, it is time to negotiate the contract itself.
As already mentioned in the earlier part of this article, the landlord is usually a professional, large company that has extensive contracts, with many provisions incomprehensible to a non-professional, as well as a team of lawyers ready to protect the interests of the landlord very well. That is why a responsible approach to the topic on the part of the tenant is so important. Legal handling of leases can be quite complicated, which is why an experienced lease lawyer usually proves to be very helpful. Renting commercial premises or renting premises in a shopping mall is a complex undertaking, in which a contract is often signed for several years. Therefore, you should protect your interests as much as possible.
Due to the fact that the negotiating position of the parties in this respect is not equal, 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?
Times are uncertain today. It is difficult to predict the development of markets and all threats that may appear in the future. Below, however, we draw attention to the key issues that are worth considering "for today".
Lease period - often, landlords in shopping malls, wanting to ensure primarily the stability of their investment and a consistent appearance, as well as the availability of shops/services in the mall, try to sign long-term lease contracts. Nowadays, when the economic, tax and financial situation is uncertain, signing such an agreement may have consequences - an unprofitable business may force us to "contribute to the business" every month in order to pay off the obligations arising from the lease. Unfortunately, we are contacted by clients who, due to such contracts, had to sell personal property, sometimes even their house. It is therefore worth signing shorter contracts, which can be extended for further years if the tenant submits appropriate declarations about their extension. Especially with the first, second and even third premises.
Termination of the contract - for the same reasons, it is worth protecting your interests by including in the contract the circumstances which, if they occur, will enable the tenant to unilaterally terminate the contract. An example may be - because we used to negotiate such a provision in accordance with the client's will - the possibility of unilaterally terminating the contract in the event of Poland engaging in an armed conflict. Unlikely? An epidemic four years ago also seemed unlikely. Therefore, it is worth carefully analyzing the circumstances that could cause us to want to terminate the lease agreement with immediate effect or automatically receive a large rent discount. Although it should be remembered that the gallery will usually resist on these issues.
Rent indexation – the indexation clause involves increasing the rent as inflation increases. Nowadays, when it is so high and constantly changing, wisely constructing provisions regarding indexation is crucial. It is certain that the landlord will want to include it in the contract, but it is worth constructing it in a way that is as least painful and burdensome for the tenant as possible.
What can a tenant get from the mall?
How to rent a premises from a gallery? As advantageously as possible - that's obvious. Below we present a few more typical provisions that are typical and beneficial to the tenant in this type of economic relations. It is worth thinking about them when planning negotiations.
Rent free – this is a period for which the tenant is not obliged to pay rent. Landlords are aware of the challenges facing a new business, which is why many of them are often ready to waive rent collection for the first months.
Example: A newly established store in a shopping mall does not pay rent for the first two months, and for the next two months it only pays 50%. During this time, he or she has the opportunity to incur lower costs and thus "bounce back" after incurring large expenses on renovation and setting up of the store, as well as promoting the store, so that in the future he can easily earn money for his obligations to the lessor.
Surcharge for furnishing the premises – sometimes it happens that the owners of a shopping mall want to arrange the premises as quickly as possible and start work. In such situations, it is possible that they will co-finance the tenant's investment by providing a certain amount for the furnishing of the rented premises. This is also a good promise of future profits for the gallery.
The right to place the logo on various surfaces - the external facade, the board at the entrance, or the so-called pylon or totem pole.
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. Termination".
The method of terminating a lease agreement depends on whether it was concluded for a fixed or indefinite period. In the latter case, both the landlord and the tenant may terminate the lease subject to the contractual deadlines and, failing that, the statutory deadlines.
However, if the rental period is specified, and this is most often the case, the tenant may terminate the lease agreement only in the cases provided for in the agreement. That is why it is so important to negotiate provisions favorable to the tenant in this respect. Many premises will not survive the test of many years and you should not approach the matter too optimistically the first time.
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.