n00b looking to rent a commerical property.

[tangychips]

Thinking of starting a business (cafe) in Melbourne CBD. Anyone know any good locations?

Also I'm quite new when it comes to property let alone commercial property, what are standard terms for a rental contract -

Eg, upfront bond, period, break fees, what you can/can't do?

How negotiable are prices?

 

[Scott No Mates]

Sounding a bit green tangy.

Before dabbling in retail property you should take 2 Bex & have a good lie down. If you still feel that way tgen you'll need a business plan to work out your metrics ie turnover, gross profits, wages/on costs, input costs, utilities, overheads and after allowing for profit what is left for rent.

The usage will be governed by the retail leases act which Vcat provides a guide so you get a basic understanding of how it works. Retail leases generally don't have break clauses and must be offered on a minimum 5 year term but you can request less.

Fit out will cost a motza so if you can find an established site with the required services ie sufficient exhaust, 3 phase power, ample gas, trade waste drainage etc your costs will be a bit more palatable. Don't just take a fitted out site without knowing why the previous tenant vacated eg business failure, lack of pedestrian traffic, incompetent, wrong products etc.

 

[Aaron_C]

Check out the Retail Leases Act as this will be what governs your lease: http://www.austlii.edu.au/au/legis/vic/consol_act/rla2003135/

Fitout will be your biggest cost, as will the security deposit (circa 6 months of rent). These must all be from cash. Your equipment (depending on what it is) can be financed, however. Tread carefully, make sure your foot traffic justifies the rent. Spend hours/days sitting outside your neighbours to count foot traffic.

 

[Deltaberry]

Depending where you look, your rent will start anywhere around $60k for a place that is barely survivable to up to say $150-250kpa for some small shops. We rent a number of these out to people.

They're no small numbers compared to the suburbs or fringe areas. Make sure you can stomach that even if business struggles. That said, obviously a lot of people still think it's okay and that's why there's so many cafes etc around. The CBD moving population per day is around 800,000 people.

 

[Edmond Dantes]

I've been keeping an eye on this place entering Wynyard station, sydney. Few shops have been fitted there, all of them closing in less than 6 months. Does this mean they still pay rent even if they leave? Or, do they pay a penalty to get out?

The shop is only few meters wide, but quite deep. This is why it's so difficult as people only get attracted seeing from the outside. No one wants to get in to see what's in there. It's difficult to fit something that people can see when walking inside/outside the station. Now there's an asian restaurant there, which I think it won't last long.

 

[MRO]

If they have a lease they would have to keep paying until the lessor finds a new tenant to take over. There would be additional costs with this as well such as a leasing fee.

 

[Scott No Mates]

Edmund, if you enter a lease, you have an agreement to pay rent until the end of the lease. If your business fails, oh dear, how sad, never mind. Sorry - you are obliged to pay until the end of the lease or when the premises are relet.

This may mean that the lessor will claim the bond/bank guarantee as well as making a claim against your assets eg house, car, IP's etc.

Frontage is all important for (most) retailers - if they can't see what you are selling, you won't be selling much. A cafe (providing t/a coffee & cakes or a t/a foodie with bain maries) may survive as a hole in the wall but a shoe/clothing shop needs to have width for their displays.

 

[Edmond Dantes]

If they have a lease they would have to keep paying until the lessor finds a new tenant to take over.

Edmund, if you enter a lease, you have an agreement to pay rent until the end of the lease. If your business fails, oh dear, how sad, never mind. Sorry - you are obliged to pay until the end of the lease or when the premises are relet.

thanks guys.. due to its location, this could easily be rented again. A coffee shop could be the only option, but there's another one just in the corner.

 

[Scott No Mates]

.. due to its location, this could easily be rented again.

Like any commercial property, it may lease the next day or it may take years. The owner is under no obligation to find another tenant until the lease expires. That is, unless the tenant declares bankrupcy or pays a negotiated settlement, the obligations under the lease remain the tenant's responsibility to find a replacement tenant.

A coffee shop could be the only option, but there's another one just in the corner.

And there is no restriction on the number of shops which can sell coffee etc in a shopping centre. It is called competition.

 

[Aaron_C]

Hole in the wall only works if you got a unique product/marketing and can attract foot traffic despite your ostensibly crappy location.