How much does retail space cost?
Posted about 1 year ago
The cost of renting retail space in the UK varies enormously from location to location. As is the case with most things, London tends to be more expensive in general than other cities, but the payoff of being in the capital often makes up for it.
When you’re looking for space, most agents or landlords will list their spaces with a price per square foot or square metre. This is a handy way of comparing the value of different spaces on a direct comparison basis, without being tied to comparing solely the overall cost (even though that’s important).
You need to work our your budget, and how much space you need (we have handy articles on that available for retail and hospitality businesses). If you’re struggling to work out where your business should be, we’ve also got a great Help Centre article on that, too! You need to bear in mind your target audience, where they hang out and visit frequently, and how they get there.
Balancing all these considerations is the key to ensuring you will end up with a profitable and popular business.
The average cost of retail space in the UK (2019)
The cost of retail space increases in large towns and cities as opposed to smaller, regional centres. Whilst it’s difficult to give exact figures for average rental values, the areas below have some of the highest averages:
Price Per Square Metre by Region
London (West End) - £14,355 Glasgow - £2,340 London (City) - £1,898 Edinburgh - £1,609 Manchester - £1,545 Leeds - £1,355 Birmingham - £1,139 Cardiff - £1,030
What Other Costs Are There?
The costs associated with running a retail business extend beyond your rent, though this will of course be one of the biggest expenses you have to cover. It’s best to go in to a lease with at least a few months’ rent in the bank to help smooth over cash flow as you open. In fact, many entrepreneurs like to make sure that they have enough money to cover two years’ worth of rent, just in case profitability suffers in the early stages of the business opening. Other things to consider, though, include:
Licenses, permits and insurance – this is a vital cost centre that needs to be factored into your budget. This will vary in scale depending on the type of business you’re operating, but you will need to consider employers’ liability and commercial property insurance for sure.
Professional services – these are an oft-forgotten aspect to running a business and are easy to forget when putting together your budgets and projections. For example, you may need some legal advice to help with incorporation and governance, or an accountant to manage your finances. There is no standard cost for these services, and it’s hard for us to give a guide here. However, in the WBTC marketplace you can find trusted approved suppliers for legal and other work, which you might find useful. If you do go on to use a professional services company on an ongoing basis, for example for bookkeeping, tax returns, payroll and advice, you can arrange a package deal that is likely to be somewhere between £60 and £250 a month, depending on your business.
Utilities – Just like with a residential property, you will need to ensure you have services at your commercial premises. Water, gas and electric are vital to any business, but you might also want to look at telephony and broadband services – particularly as free wi-fi is expected by lots of customers these days!
Fit out and furnishing – For a retail premises, the cost of getting the space ready for occupation is likely to be substantial. You’ll need to consider the basics, like signage, flooring, shelves and point of sale but you may also need extra furniture based on your type of business. You can, of course, invest as little or as much as you like in the fit our and furnishing of your space – going all out or keeping things minimal – as long as everything is in keeping with the brand and customer for your business.
Stock – obviously, your business isn’t going to be able to get started without things to sell! At first, it’s likely to be difficult for you to predict the sales rate or different products, so you should have enough inventory to cover you for up to four months (although this may not be possible if your stock is perishable!)
Technology and equipment – This can be absolutely vital to the success of your business. You’ll need a Point of Sale (POS or EPOS) system along with monitors and CCTV equipment. Depending on the type of systems you’re after, you’ll pay between £500 and £1500 for it, with the cheaper options hosted on iPads or other tablet devices.
Staffing – one of the biggest cost centres for any retail business comes from staff salaries. Of course, the scale of this expense will vary depending on how many people you need (and how much you pay them!). At We Built This City, we encourage all businesses to pay Living Wage wherever possible, so it will be necessary to factor this in.
Cleaning and maintenance – The busier your premises is, the more cleaning you’ll need, and the cost will vary accordingly. Most commercial clearners charge between £10 and £20 per hour, so you’ll need to factor in quite high costs if your retail space is large, or based in the city centre.
Other expenses – this is a bit catch-all, but you’ll obviously need to budget for things like marketing, office supplies and consumables for your till points. These shouldn’t have too much of an impact on your budget, but it’s always best to be thorough.
What other expenses are there?
Depending on your landlord, you may be charged some extra monthly fees on top of your rent. Three of the most common are:
Common area maintenance (CAM) – This charge goes towards covering the cost of maintaining the building and any exterior space.
Tax – you’ll need to pay tax (including Business Rates) on your business premises.
Insurance – The landlord may take out a common policy to protect against damage to the material of the building and may pass the cost down to you.
Sometimes, landlords will incorporate these three main costs into your rental agreement as a “triple net” lease. Beware that this may be up to £200 more expensive than leases that exclude these charges. At We Built This City, we ask landlords to be as transparent as possible when listing the costs associated with their space to make it as easy as possible for you to budget
Find Your Perfect Retail Space
We Built This City uses a unique data-based system to match you with the perfect space for your business. All you need to do (if you haven’t already!) is sign up, complete you profile, and tell us what you’re looking for. We then showcase your business to landlords who have spaces that match what you need.