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Category :- General

Author :- mathew jazenko 
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Posted on January 23, 2014, 6:54 pm
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Have you ever thought about locating in a shopping mall? That is what one client of mine asked me this week. To her this was a simple question. To me this is a simple question with complex answers filled with what ifs. What came next was a 2 hour explanation of what renting inside a shopping mall exactly entails.


To the uninitiated who do not speak or let alone understand that much about real estate, here is a quick primer on shopping mall rentals. Location, location, location First off, everyone thinks that locating inside a shopping mall will generate riches, that much is true. Only that it generates riches for the mall owners, not necessarily the tenant.

I should also mention that not all locations are the same and in fact some are much pricier than others. For example, if one decides to locate their business near an entrance of the same mall, then get ready to pay more. A LOT MORE! Why? This is the heaviest traffic anywhere in the shopping mall. People coming through this area will walk past and see your store and perhaps stop by. This is guaranteed traffic, unlike say in the middle of the mall located between other lesser known stores such as Newmarket Widgets Inc. Locating beside a popular international name like Wal-Mart or Target will definitely cost more. As this is a known store name, people will be drawn to it and go in. This does not however, guarantee that people will stop in and purchase something at your store either.

Common Areas

These are areas that as the name suggests are common to all the stores, like the space outside your store, the parking lot, landscaped areas and food court seating area. Someone has to pay for this ‘dead’ space. It is ‘dead’ because it does not generate any income and someone has to make up for this so called lost revenue. This fee is on top of the rent that the tenant pays the mall. The mall maintains the common areas so that they are kept clean and have an appealing look. I really do not know of anyone that would prefer to shop in a run down, unkept mall.


This is the most important part of all, the lease. The lease will state what is expected of the tenant, hours of operation (usually mall hours), and the amount of rent due each month, plus any promotions the mall will run from time to time to get people to come to the mall. This is not an end all be all list, but just a quick overview of what to expect. I could burn your eyeballs out with all the details of the lease, but that is what lawyers and commercial real estate agents are for. laugh

How do the big boys do it?

The big boys are experts at which locations they want and do not want. They have been in business for a while and have it all down to a science. The big boys for instance get a break in the rent because, they are well, big. The big boys always have more leverage than just a small person operation. That is why they are big and have more money than some small countries. Hello Wal-mart. Also, the big boys have whole departments dedicated to leasing called legal, finance and real estate. These departments are independent yet interdependent on each other. Real estate maps out the space on a computer and calculates how much space is allocated to the stores and finds the tenants to fill those spaces. Finance calculates the amount of revenue on a per square foot basis each space will generate. Next the file is passed to the legal department for their input on leasing conditions. Finally the file is sent back to the real estate department to sign up all those new prospective tenants. That in a nutshell is how the big boys do it.

This post is designed not to tell you not to locate in a shopping mall, but just to inform. Some businesses are more suited to mall locations than others. A corporate law firm inside a shopping mall is non-starter but a convenience store would do well. But before you go ahead and sign the bottom line, get a lawyer to look it over and ask lots of questions. Also get your commercial realtor, if you are working with one, to point out the contractual details as well. It is far better to spend a little time and money up front to know the lease, warts and all, then 6 months down the road and scream ‘that is not fair’

Site (source)  : 10 years as a real estate appraiser
Email to contact  : mathew.jazenko@accountingprofessionals.ca
Notes  : I welcome any and all coments to my posts. If I have made an error somewhere, do not hesitate to point it out. If you like what you read, by all means let your friends know. If you do not like what you read, let me know.
Facebook  : https://www.facebook.com/pages/MRJ-Financial-Solutions
Twitter  : @mrjfinancial
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