How to calculate the space you need for your retail store
Posted about 2 months ago
Over the past few years, retail has changed a lot. It’s a bit cliched to say, but the rise of online retail has had an enormous effect on how people shop and what matters to consumers when visiting physical stores.
During the COVID-19 lockdown, in Q2 2020, the evolution of retail has accelerated and, as much as it has burnished the wealth of e-commerce entrepreneurs like Jeff Bezos, it has also seen a renewed focus on the importance of local, independent retail.
Alongside this has been a rise in convenience shopping at the expense of larger, out-of-town stores. People very much value convenience – shopping little and often rather than making a weekly trip to larger stores. A study by by the ACS has shown that each person now shops almost four times per week, with an average spend of £6.38 on every visit. Over a quarter of people who use small food shops visit every day. And this is a trend that’s not going anywhere.
Another trend to be aware of has seen the closure of pubs across the UK (with the widely reported apocryphal statistic that ‘a pub closes ever day in Britain’). Cafes and restaurants, though, are thriving, taking an increasing share of the market. Additionally, the high street is becoming more dominated by things like juice bars and cafes. Not only are they increasing their presence, they’re increasing their size and moving into some of the most prominent retail spaces.
If you’re thinking of moving into a new retail premises, it’s important to be aware of the prevailing trends in the industry and use these to work out how much space you can afford to rent, and in which location you should rent it.
How to calculate how much space you’ll need
It’s easy to neglect the size of space you’re looking for - after all, location, condition and cost are important, too. But get it wrong, and you can be in trouble. If the space is too small, you won’t have enough room to stock a full product line or are forced to make compromises on merchandising. This is a huge turn-off for shoppers and visitors and will drive down your revenue. Renting a space that’s too large, though, has its own problems – it can make customers feel uneasy. Having enough space for adequate merchandising and display without overcrowding or under-stocking is a balance!
On top of the shop floor, you’ll need to factor in additional square footage to accommodate the relevant facilities. For example, most retail units will require an office, a stockroom and staff toilets.
One method for working out how much space you’ll need is to calculate your ‘sales per square foot’ as the basis for your new unit. For this, you’ll need projected sales figures and have an idea of where you’d like your unit to be.
To calculate your sales per square foot, simply take the sales you expect to make for the coming year (you can do this using market research, your experience, or a financial plan) and divide it by 120.
For example, if you think that you’ll turnover £320,000 per annum, you would need 2,666 square feet of space.
Renting too much space can be a problem
If you take one piece of advice from this article, it should be that it’s best not to stretch your budget too far. It can be tempting to sign a lease on the biggest possible space you can afford, but this is not a good idea for a few reasons:
The vast majority of retail businesses won’t turn a profit until their third year of operation. That means you’ll need to be able to cover your expenses for a significant amount of time. If you’re paying at the top-end of your tolerance for rental fees, your break-even point will be delayed.
If your business is successful, it’s likely you’ll be renting the same premises for some time and, as you grow, your other costs will go up. You need to make sure you can stay on top of all your expenses including the cost of inflation.
Larger premises come with larger fixed costs, too – utilities, insurance and, with some leases, taxes will be higher.
It can be tempting to view renting a commercial property as an investment that will continue to be suitable as your business grows, but it’s important not to sign a lease that you can’t comfortably afford. It can be helpful, when figuring out your projected budgets, to overestimate your other expenses. This should mean that you can survive more difficult periods and continue trading long into the future.
Space isn’t the only thing that will impact your profitability
Of course, it’s key that you establish how much space you’re likely to need early on, but you shouldn’t neglect other areas of your business. The location of your business, for example, can make or break it and so it’s often better to take smaller premises in a better location than a large store away from areas of high footfall.
Retail units are, by their very nature, public facing and so it’s vitally important to choose a property that’s practical and presentable. Access is important, so that any customers with mobility issues can enter and exit the premises without impediment.
How to find a suitable retail space
So, you’ve read our tips and tricks for choosing the right retail space for your business – what’s next? Well, great retail real estate isn’t always easy to find and access. But we’re here to help.
Too often, researching the market is fruitless and you end up scrolling through endless property listings, not really knowing what to look for and not knowing what’s still really available.
But if you use We Built This City, we’ll match you directly with spaces that meet your needs. There are just three simple steps to meeting your match:
Register – it takes less than 2 minutes to enter your basic details and get started. You can do that here.
Create a profile – we show your profile to landlords and agents who might be interested in you as an occuppier. Think of it like an online dating profile for your business – you need to focus on what makes your company and concept so great!
Tell us what you’re looking for – finally just answer a few questions about what you’re looking for, and we’ll do the rest!