Retail rents are not just a price for bricks & mortar, they’re a price for exposure to monetisable footfall.
Many retailers overlook the true drivers of rental costs, focusing too much on what’s visible and controllable, and too little on what actually fuels performance.
Five facts most retailers overlook:
- Location is King: On the high street, around 60–70% of rental cost is determined by location quality, while the property accounts for only 30–40%. Where your store sits matters far more than the building’s features.
- Footfall Volume Matters: The number of people passing by determines whether your store can cover its fixed costs. But not all footfall is equal, focus on the addressable footfall relevant to your brand.
- Rental Worth vs. Rental Value: The true worth of a location to you, is defined by its ability to convert effective footfall into revenue.
- Negotiation Bias: Rent negotiations often center on the building itself, rather than the exposure to demand. This can lead to aggressive rents in locations that don’t deliver sales performance.
- Governance Blind Spots: Investment committees tend to approve what’s visible; layouts and capex, while assuming demand outside the store will follow. This can result in misaligned rents and missed opportunities.
Why Misalignment Happens
Retailers and decision-makers often underweight the factors that truly drive store performance. This bias is reinforced by governance structures that prioritize tangible metrics over demand realities. The result? High footfall locations can still fail, and some brands thrive in less busy but more relevant hotspots.
Watch the Occupancy Cost Ratio (Effort Rate)
The occupancy cost ratio, the ratio of rent to revenue, is often the first signal that demand was misjudged. If this ratio is forecast wrong or increases, it’s an early warning sign that the location’s demand was overestimated.
Practical Negotiation Insight
Re-anchor rent discussions on location quality. Use objective tools and data to evidence demand quality. Footfall analytics, demographic studies, and market benchmarks can materially improve your negotiating leverage and ensure rent reflects true exposure to demand. There is a cost, but it will be much cheaper than getting the location wrong.
How Brand Retail Solutions Can Help
At Brand Retail Solutions, we specialize in helping retailers objectively assess location quality, stress-test demand assumptions, and sequence store network decisions so that rent reflects demand reality, not just property features. If this perspective resonates, now might be the right time to get in touch.
David Selzer
Brand Retail Solutions
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