The process for retailers qualifying for a commercial lease can vary from landlord to landlord. Landlords consider several factors including tenant mix, personal credit history of the owner, company balance sheet, profit and loss statements, open credit lines, and growth projections. Small business owners will be required to sign personal guarantees. In commercial leases, a solid business plan and proof the tenant has enough liquidity for upfront buildout expenses and operating capital goes along ways toward approval. Tenants will need to show enough income in their plans or existing business that will satisfactory the monthly base rent plus pass-through charges of the lease. The out-of-pocket costs to the landlord will be a factor when leasing the space to the tenant. If the costs are relatively low, with little or no tenant improvements, then the landlords may be willing to take a greater risk. Tenant mix, and the presence of ‘high profile’ retailers, is one of the main reason why consumers shop in a particular location. Many tenants can qualify to lease space if the Landlord thinks their concept will do well in their shopping center and compliment co- tenants making their overal center more attractive to consumers. For example, a landlord with a vacant space next to a movie theater would rather have an ice cream shop than a dry cleaners even if the owners of the ice cream shop are not as financially qualified as the owners of the dry cleaners. Think like a landlord and you will be better prepared to get the terms you want and need in your lease.
Since there are alot of varying qualifications, we recommend using an ICSC professional that has experience in retail tenant representation who can guide you through the lease qualification process. We always recommend our clients hire an attorney to review the lease and negotiate the legal terms with the landlord’s attorney.
Contact the writer: Robert Tack is president of Capital Retail Group, which specializes in lease negotiations, site selections and overall tenant representation. You can reach Robert at (202) 3609-1938 or at www.capitalretail.com