How Much Retail Space Do I Need?

The retail landscape has changed significantly over the past few years. As shopping habits evolve, the type and size of stores on high streets, in shopping malls and in retail parks are adapting.

Let's take grocery shopping as an example. In previous years, consumers would travel to large supermarkets for their food shop and head to the high street to visit the medium-sized clothes stores and smaller cafes there. Today, people increasingly value convenience, shopping little and often rather than making a weekly trip to a large, out-of-town supermarket.

In fact, studies have shown that the average person visits a local convenience store 3.8 times per week, spending an average of £6.38 each time. Of those that use small food shops, 26% visit every single day. This has paved the way for retailers to launch more and more profitable convenience stores across the UK.

At the same time, pubs are closing down, while cafes and eateries are occupying a larger share of the retail market. According to research, juice bars, cake shops and speciality restaurants are all becoming more commonplace on the British high street. Not only are individual coffee shops increasing in size, but they're also moving into some of the most prominent retail spots.

To keep up with the changing retail landscape, you'll need to take note of industry trends to work out how much floor space you can reasonably afford to rent and where you should base your business.

How Big Should a Retail Store Be?

The size of your commercial premises may fall quite low on your priority list - after its location, condition and cost - but it's crucial you get it right. Rent too small a space, and you won't have enough room to display your products, forcing you to squeeze them onto cluttered shelves, cabinets and rails. This can be overwhelming for visitors, particularly if the walkways are narrow and they have to dodge other shoppers.

On the other hand, a space that's too big can result in an awkward layout and make customers feel uneasy - particularly if they're the only one in the store. Of course, many high-end stores consciously leave 'breathing' room, but you should be deliberate if you're taking this route and make sure it works for your business.

When you're working out how much retail space you'll need for your venture, make sure you factor in room for all the relevant facilities. For example, you should probably allow for an office area, a stockroom and staff and customer toilets. Clothing retailers might want to incorporate space for changing rooms, while businesses with an online division may need room for 'click and collect' parcels.

'Sales Per Square Foot' Calculations Can Help You Work Out How Much Space You Need

The best way to work out how much retail space you'll need is to use the 'sales per square foot' approach. If you have your projected sales figures and a preferred location, it's fairly easy to do.

Firstly, find out the average 'sales per square foot' figure for the type of store you're opening in the location you're opening it in. For instance, if you want to open a toy store in Oxford, you might discover that the sales per square foot for toy stores in Oxford average £120.

Then, take your projected yearly sales income - you might think, after carrying out market research, that you'll make £200,000 annually. So, divide 200,000 by 120. In this scenario, you would need around 1,666 square feet of space.

Renting Too Much Retail Space Can Cause Problems

When you're looking for suitable retail premises, it can be tempting to stretch your budget and secure the largest space you can possibly afford. However, we don't recommend that you do this, for a few reasons:

• Most retail businesses don't turn a profit until their third year in operation. That means you'll have to assess your costs carefully to make sure you can cover all your expenses for a significant amount of time. High rental fees will only delay your break-even point and exacerbate your money worries in the meantime.
• When you take on a rental property, you should think about your long-term plans. If your business succeeds, you'll probably still be renting the retail space in several years' time. At this point, the cost of your expenses will almost definitely be higher, so you need to make sure you can survive the effects of inflation while you're occupying the premises.
• It's not just your rental costs that will increase if you opt for a larger premises. You'll need to spend more on utilities and insurance too, and, if you're on a triple net lease, your taxes will also be higher.

We understand that you may want to make sure you invest in a property that can accommodate business growth over the years, but it's important you don't sign a contract for a lease you can't comfortably afford. For this reason, try to overestimate your other expenses rather than underestimate them when working out your ideal rental costs. This should mean you are able to survive difficult periods and continue trading into the future.

Space Isn't the Only Thing That Affects Profitability

Although establishing how much retail space you need is key, you shouldn't necessarily prioritise space above other factors. Your location can make or break your venture, so always consider opting for a smaller premises in a great location instead of a larger property in an unsuitable spot. It's also a false economy to try to save money by setting a store up in a quiet area. You're likely to spend more on marketing to get customers to come to you than you save in rental costs anyway.

It's also important that the property you choose is practical and presentable. You should make sure it has good access for customers with mobility issues and is functional for everyday operations. Listed buildings and planning restrictions may have an effect on the amount of changes you can make to the premises, so remember to keep these in mind if, for example, you want to create eye-catching window displays.

Develop a Good Layout

When you're selecting your retail space, make sure there's room to set up your displays in an efficient and effective way. Here are our top tips when it comes to store layout:

• As we've already mentioned, it's vital you create enough circulation room for customers to browse your products without feeling overwhelmed or crowded. Putting too many items within a small space will slow customer traffic and may cause shoppers to feel frustrated.
• When deciding where to place your different products, aim to group related items together. This should increase the number of impulse purchases made, as customers buying one thing will spot others useful products they may need.
• If relevant for your retail business, allocate space near the front of the store for seasonal products. These will change over the months, but being able to place them near the door should boost your profitability. Customers will spot useful or desirable items as soon as they walk in and be tempted to buy them.

How to Find a Suitable Retail Space

So, you know our tips and tricks for choosing the right amount of retail space - what next? Great retail spaces aren't always easy to find, and the best spots don't become available very often. For this reason, take the time to research the market thoroughly and make a shortlist of your top five properties. Once you have identified multiple premises, you can compare and contrast them to get a better idea of their individual strengths and weaknesses.

When you're assessing their suitability, ask yourself:

• Is this property in a lucrative area?
• Is there enough space for all the facilities I need?
• Will I be able to comfortably display all the products I want to?
• Could I install the equipment and technology I need?
• Does the space have the potential to be functional?
• Does the size and shape of the premises allow for an efficient store layout?
• Do my financial projections and 'sales per square foot' calculations tally with the rental costs?
• Will this space be suitable, profitable and affordable in three years' time?