It is an acknowledged fact that the location of a store is key factor in its success.  You need proximity to an adequate pool of potential customers. Transportation and parking are important factors in getting these customers into your shop.

But what about the question of whether you should lease or own your store’s location?  An informal survey of long-standing retail businesses (like ours) shows that one common denominator in the shop’s success is often owning the store’s premises instead of being at the mercy of a landlord.

The volatile rental market for commercial real estate frequently means that stores that are doing well face huge increases in rent over time. Those that aren’t doing well often suffer because their location is not conducive to retail success.  And lest you assume that all landlords hike rents because they are greedy, I would add that these increase are often the result of a building being sold at a high price to a new buyer, or taxes and other expenses going up exponentially.

Buying a building is not something to be undertaken lightly, of course, and you probably wouldn’t want to do it unless you had a few years of successful retailing under your belt.  In almost every part of the country, prices for commercial real estate have been escalating (and you’ll want to make sure that the property you’re looking at is zoned commercial, not residential).

But it may be easier to procure a loan, or investors, to help in the purchase of a building than it would be to finance inventory or other retail-related expenses. When you become your own landlord you will need to pay all the taxes and utilities, of course, and to have a rainy day fund for when the building needs repairs — and you can be sure that it will.  It’s also important to keep the design of your building flexible so that you can lease it out, or sell it, if your shop closes. 

Check with your lawyer about the best way to structure the buying of a building for your store to use. We own ours as individuals and lease it to our store as a corporation, paying rent every month so that this cost of doing business is accurately reflected in our profit and loss statement.

Owning your own building may not be an option for you, and buying real estate may not be a wise business decision. But you might consider investigating it if it will help assure the long-term future of your store.

Happy Retailing,

Carol “Orange” Schroeder