How to choose the ideal retail lease and location for your business in 2025

The Victorian Small Business Commissioner has recently shared tips to help small businesses choose an ideal retail lease and location in 2025.

“A retail lease is a significant financial and legal commitment that will shape your business’ trajectory for years to come,” said Victorian Small Business Commissioner Lynda McAlary-Smith. “This New Year, resolve to invest in setting up the right lease agreement for your business, and if you’re already in a lease, review it to ensure you’re on the right track.”

Here are the Commissioner’s seven tips for choosing the ideal lease and location for you:

1) Act on the business’ needs rather than your wants

It’s more important to choose a location that is apt for the target market it intends to focus on, rather than the trendiest spot in town.

“Consider your business plan, customer base, and potential foot traffic. Make sure your desired premises is the right ‘fit’ for your business,” McAlary-Smith said.

2) Gather all the facts

The landlord or their managing agent should provide a copy of the lease and a disclosure statement which includes floor plans and a list of outgoings (expenses the lessee might need to pay).

3) Understand the proposed agreement

Lease agreements are complex documents that contain a lot of legal language and clauses. Lessee businesses should take time to understand key elements such as the permitted use, maintenance responsibilities, options to renew, notice periods and exit clauses. The Commissioner advises seeking a review and advice from a lawyer if you find it difficult to understand the terms of an agreement.

4) Consider all costs and conduct budget forecasting

Lessees should know how the rent is to be calculated. Will the rent be indexed with CPI (consumer price index) or will there be set rate increases with each year? Beyond the rent, lessees should also keep in mind the outgoings (expenses a landlord can pass on such as council rates), utilities, insurance, and fit-out costs that can affect the lessee’s capability to pay the monthly rent. Therefore, it is important to budget realistically and anticipate likely increases.

5) Plan ahead

Lessees should take into consideration the potential changes that can affect the business’ future needs in terms of location, whether it is growth or decline. There should be clauses in place that can allow the lessee to sublet or even transfer the lease. As McAlary-Smith pointed out, “In short: don’t forget to think about the “what ifs” before you commit.”

6) Consider a pop-up

If lessees are trialling an idea, or feel hesitant to commit to a long lease, they should consider a short-term lease of several months or a single year. If the business is successful, they then have the option to negotiating a new lease at the arrangement’s conclusion.

7) Negotiate

Lessees should not be afraid to negotiate rent, lease duration, outgoings, and other terms. “Landlords expect it, and a well-negotiated lease can save you significant money over the long term,” McAlary-Smith explains. “Entering into a lease is exciting, but don’t let this emotionally charge your decision-making. If negotiating isn’t your strong point, consider enlisting a trusted friend or family member to help.”

For more information on choosing the ideal retail lease for you, consider these ten questions written by a legal professional. The Victorian Small Business Commissioner has also previously contributed an article on this topic to ISB.

The post How to choose the ideal retail lease and location for your business in 2025 appeared first on Inside Small Business.