Upsizing of Premises

Upsizing of Premises

More and more tenants, like pharmacists for example, in an attempt to compete with Power stores are up-sizing their premises. This is often is done by either taking over the store next door when the lease on that store expires or by building onto the existing premises.

This action to up-size may affect the lease on your existing store and tenants who embark on this course of action should take into account the following:-

Prior to breaking down walls and other structures always re-measure the total size of the premises. You may find that that the size of the premises you have after the renovation, does not add up to the size of the two stores as originally provided for in the individual leases.

Rentals per square metre for larger stores are often lower than for specialty stores.

Thus, if you are now a larger store, it is critical that you negotiate your rental for the combined premises with the landlord and that he recognises this fact. Do not simply add the rental paid on the new store to your existing store to arrive at the total rent payable.

Ensure that the city council is aware of the consolidated status of the new store and you are assessed for rates and taxes accordingly.

It is critical that you get the original lease to be varied so that rental adjustments and termination on both stores are synchronised to a common date.

Usually the up-sizing of a store will entail the investment of a substantially increased amount of stock. This may also entail that you have a store room facility in the centre to carry reserve stock holdings.

Try to negotiate for a storeroom by way of a licence agreement simultaneously with the new lease. It should be contiguous with the new lease and end on the same date. Usually such store room facility should be on a rental only basis with no outgoings payable.

This is an excerpt from the Retailer's Survival Kit by Hymie Zawatzky

HYMIE ZAWATZKY