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Independents on the move

Business
Optical practitioners face a great many questions when considering whether to move premises. Paul Clapham examines some of the issues

DSCN3198.jpgRelocating a retail store is no lightly taken decision. Where non-retail businesses can move almost at will to respond to a variety of commercial prompts, the retailer is still subject to those three magic criteria: location, location, location. Moreover, moving to a better location requires care lest existing customers are lost in the process of gaining new ones.

There are also changes afoot in the retail market. Greg Shutt, associate and agency expert with national property consultancy Bruton Knowles, comments: 'For the first time in 20 years, retailer investment in property in town centres has exceeded that in out-of-town/edge-of-town retail locations, due to restrictive government planning policies which have virtually stopped new out-of-town developments.'

Consequently, the high street independent faces much tougher competition from larger multiples. These larger competitors come armed with the buying power, legal teams and property specialists of a group, making it difficult for any independent retailer trying to stay on the high street. It is also getting more expensive to locate on the high street due to upward-only rent reviews which drive costs ever higher. On average a small retailer's rent now represents between 7-10 per cent of sales, compared to multiples where it averages around 3 per cent.

Out-of-town and edge-of-town locations are often less supportive of independent retailers. Typical unit sizes on modern out-of-town developments tend to preclude most small retailers developers prefer high profile brand names who are seen as secure tenants. Older out-of-town locations or 'mall' style opportunities on supermarket sites can offer suitable units, but because they often boast a supposedly captive audience and provide amenities such as parking and direct public transport, they can be expensive.

However, Bruton Knowles believes these pressures may soon undergo a sea-change. A recent government-commissioned report on planning, produced by economist Kate Barker has advised the government to drop some restrictive policies on out-of-town retail development.

If this is delivered, some balance could return to the market with more multiples pursuing more out-of-town locations, taking some pressure off high-street independents.

Deciding whether to move must be based on a realistic analysis of costs and benefits of a location. It will depend on whether this is a new retail enterprise, a downsizing exercise or an expansion.

For example, for a new enterprise without a loyal customer base, a high profile location may be an important investment in attracting footfall. Whereas a business relocating to cut costs must be very realistic about moving costs - always greater than anticipated - and the viability of trade in a new location, versus the benefit of lower rent.

In addition to footfall and customer appeal, there are some key factors to consider:

? Amenities - parking, traffic restrictions, deliveries, public transport, street lighting

? Competitor impact - the nature of neighbouring businesses, whether a cluster of similar businesses will benefit you

? Crime and vandalism - security of premises, local policing initiatives, experience of neighbouring retailers

? Tenure of the premises - freehold or leasehold, if leasehold what length of lease is available, what other obligations can you include within the lease (a fully repairing or internally repairing lease, additional charges, shared areas of responsibility)

? Other costs - rates, utilities, associated costs such as parking permits.

Independent retailers should consider appointing a qualified surveyor to fight their corner. These professionals will provide expert advice on local issues, rents and planning policy. It would cost about £5,000 on a £25,000 a year lease.

For retailers, relocating is so commercially sensitive with every shopping day the store is closed, trade is lost, so meticulous planning is essential. The earlier the stop and start of services is arranged, the better. The negotiation of the lease and final completion of the legal paperwork will define the timetable, but suppliers can be placed on 'standby' before final details are confirmed. Equally, specialist services, such as shop-fitting, must be sourced well in advance, even with a vague initial timetable. Any obligations on the current premises must not be forgotten for example, some contracts state tenants must repair any dilapidations before they leave. Making final repairs will mean avoiding a hefty bill from the landlord. If there is a responsibility for dilapidations at the new premises, the services of a surveyor can once again be used to draw up a schedule of condition to be shared with the new landlord.

The move must be well publicised. A move that isn't clearly and repeatedly communicated to existing and new customers can do real damage. Retailers should plan for changes of contact information on the web, in key directories and in local media, and efforts should be repeated.

As well as planning the move, budget tightly for it, including any additional costs at the new premises. Retailers should also allow for some decline in trading for the first quarter. Some retailers assume that more expensive premises will automatically deliver an increase in trade and budget accordingly, and this is just not the case.

Even the most successful independents face some fall-off while old and new customers adjust.




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