How to Find Nashville Retail Space:
Find a Commercial Real Estate Broker
Put Together Your Budget
Learn the Different Lease Structures
Narrow Your Search
Tour Locations
Negotiate the Lease
Market Your Business
Let’s take a deeper dive into your search for retail space:
Retail Space in Nashville
As one of the United States’ strongest economies, it’s no wonder Nashville hosts an abundance of high-quality retail options.
However, having a solid business concept and plan of execution is only part of the process if you’re going brick and mortar.
Finding retail space takes careful planning and strategy in order to ensure success.
Although starting the process can be daunting, we’ll cover the steps required to secure your ideal commercial space.
Step 1: Find a Commercial Real Estate Broker
As with any successful business, it’s important to put together the right team.
A skilled tenant rep broker is an integral part of this team when looking for retail space.
Enlisting the help of tenant rep broker gives you the peace of mind that an industry professional is protecting your interests.
As anyone looking for commercial space will quickly learn, most retail landlords will be represented by their own broker, which makes it even more important to even the playing field.
Not only will a tenant rep broker be a valuable asset during negotiations, but also throughout the entire search.
Your tenant broker will be able to take care of everything from researching and curating an initial list of retail spaces to finalizing the deal.
Finally, keep in mind that landlord’s almost exclusively cover the costs of commission fees.
That means tenant representation is essentially a free service for you.
Step 2: Know Your Budget
Before narrowing down your selection of retail options it’s imperative to understand what you can afford.
Regardless of how appealing a space may seem, you need to remember that leasing a commercial retail front is also a significant business expense.
Typically, your rental costs should be no more than 10% of your gross sales.
Depending on your lease structure, which we’ll cover in step 3, there’s a good chance that rent won’t be the only cost stemming from leasing a retail space.
Property taxes, insurance, and a common area maintenance fee are all expenses that landlords typically expect their tenants to pay on a pro rata basis.
The tenant will also almost always be responsible for their own utilities.
This means factoring in the costs including electricity, water, heat & air, and internet.
There are also build out/construction costs to keep in mind.
These build outs could range from a few fairly minor alterations of a previously built out space to completely finishing a retail space out from scratch.
While your landlord may be willing to offer you an allowance or rent abatement to help with these costs, referred to as a tenant improvement allowance, you should at least be prepared to initially cover these costs.
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Step 3: Understand the Different Types of Lease Structures
As previously mentioned, not all leases are structured the same.
When searching for retail space it’s important to know which additional costs you may be responsible for.
In Nashville, you’ll typically find two kinds of retail leases: triple net (NNN) and full service (FS).
Within a triple net structure, the retail tenant is responsible for covering the costs of property taxes, insurance, and a common area maintenance fee (CAM).
Common area maintenance can cover anything and everything associated with the upkeep of a retail property, ranging from lawn care to parking lot repairs.
If you’re leasing a multi-tenant retail space, these costs will be fairly divided among the other businesses, as well.
While much less common, some landlords may offer a full-service lease.
A full-service lease maintains that the landlord with be responsible for all costs other than your rental rate.
Also not as common as a triple net lease, there is also a middle of the road option known as a modified gross lease.
A modified retail lease splits additional costs between the landlord and tenant.
Step 4: Decide How Much Space You Need
There are a number of factors that play into how large or small of a retail space you should be targeting, regardless of business type.
Too small of a space may stifle growth and hurt overall sales.
Too large may burden you with paying for “dead-space.”
It’s also important to keep in mind that leasing too much retail space may leave your business feeling empty.
When estimating how much space you need remember to not only consider the size of the sales floor/general retail area, but also any offices, restrooms, storage, and other accommodations that you’ll require.
Step 5: Narrow Your Search
After understanding your budget and how much space you’ll need, it’s time to work with your broker to narrow down your search for retail space.
While it’s advantageous to discuss multiple spaces in order to better understand the market and to compile data, it’s often more strategic to select your final contenders.
Typically, up to 7 satisfies the fine line between keeping your options open and not running into selection fatigue.
Even if one retail location is the clear favorite, it’s important to have a handful of comparable opportunities should a deal fall through.
Doing so will also allow for more leverage and less stress during the negotiation process.
Step 6: Tour Locations
With your final, or close to final, list prepared, it’s finally time to start physically touring retail spaces.
Even if a deal looks great on paper, you won’t be able to discern if it’s perfect for your retail business until you have explored both the space itself and the surrounding area.
In addition to the overall appeal of the location, there are also specific questions to keep in mind throughout your walkthroughs.
Is the space in an ideal location? Will you be accessible to your client base? Are you near or distanced from competitors depending on your needs? Are the other businesses in the area complimentary? What about the tenant mix if you are considering a multi-tenant location?
These and similar questions will help make sense of a prospective retail space.
It will also be important to remember your build out needs.
If a space seems to work after touring, it never hurts to do a second walkthrough with a contractor in order to gain a better understanding of construction costs and any other potential hurdles.
Step 7: Negotiate Your Lease
Once you’re ready to submit an offer on a space (or multiple) you’ll typically do so by submitting a letter of intent, or an LOI.
This document is never legally binding but allows both the tenant and landlord to efficiently negotiate the high priority terms of a lease.
These often include items such as rental rate, tenant improvement allowance, and rent commencement among other important deal points.
As soon as both parties are satisfied with the letter of intent, you’ll be prepared to move on to lease negotiations.
By now it’s also a good idea to engage a real estate attorney.
While an experienced broker will know what to keep an eye out for and offer guidance, your attorney is of course the most capable of assisting with all matters of the law.
After the lease has been reviewed and agreed upon, you are now officially ready to open for business.
Step 8: Market Your Business
Although it may seem like you’ve completed your retail site selection journey, there’s still plenty of work to do in order to generate buzz for your grand opening.
Rather than wait until your doors open, it’s much more advantageous to begin this process immediately after signing a lease.
This gives you the opportunity to create excitement among your client base and the community as a whole in order to hit the ground running.
While there are certainly intricacies and surprises associated with every retail deal, following these steps will prepare you to deal with all aspects of your commercial real estate search.
If you have any further questions or are ready to start a retail search of your own, reach out to us at The Cauble Group and we’ll be happy to help.
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About the Author:
Alex Abram is a Nashville Native serving The Cauble Group as an Associate Broker. Alex has a firm understanding of the market and takes extreme care in meeting his client's needs. Working with both Landlords and Tenants, Alex knows that finding the right real estate opportunity is the catalyst to a businesses success and longevity.
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