Follow our experts’ buying advice and beat the mults to the best properties on the market.
He who hesitates is lost. Just because it’s a cliché doesn’t make it any less true. And this is particularly relevant for the retail property sector. With a recent poll on the Convenience Store website revealing that 58% of retailers believe that now is the right time to buy, the market could be active for some time. Sites in the top spots are highly sought after by independents and multiples alike, creating a competitive marketplace where retailers have to move fast if they want to get the prime locations.
Londis retailer Steve Bassett is constantly on the lookout for another site. He owns three stores in Weymouth, Dorset, and another in Southampton, and is keen to expand his estate.
He believes that retailers looking for their next site need to keep their eyes peeled for opportunities at all times. “You never know when a suitable site might crop up,” says Steve. “I’ve often driven past tyre-fitting shops and thought they were perfect. It doesn’t necessarily have to be a convenience store - any site will do once it’s in the right location.”
Advertise your interest - Steve put the word out on Facebook that he was looking for a new site and it generated some strong leads. “I had friends telling me about sites I hadn’t seen and passing the message on,” he says. “Of course, once you have found a potential site, don’t tell anyone about it!”
Take your time - Paul says that no matter how long you think it might take, it’ll take longer. “Don’t rush into a site unless it’s perfect, and remember that the red tape will take more time to get through than you might think,” he says.
Don’t neglect your current business - Paul adds that if you are in the process of buying, be sure your current stores are being run properly. “You can’t be in two places at once so ensure you have the right staff to run your store in your absence,” he says.
Sanjeev Vadhera of North East Convenience Stores has just acquired his 19th store and is searching for number 20. Although he is constantly expanding the group’s estate, he believes that market conditions have increased competition for sites. “It’s a lot tougher now as competition is stronger due to the multiples being interested in the convenience sector,” says Sanjeev.
Christie & Co’s head of retail Steve Rodell agrees and says that the convenience sector has attracted the attention of the multiples, resulting in suitable sites being snapped up quickly. “It’s a very interesting market at the moment,” he says. “Convenience stores are the flavour of the month with the multiples wanting to expand into this sector. The multiples have realised there is growth in the convenience channel and want to be a part of it.
“They’re also changing their mind-set because of this. Instead of solely concentrating on one big store in an area, they’ll have four or five scattered strategically across the same space to maximise returns,” says Rodell.
It’s this interest in the convenience store sector that has dismayed Spar retailer Paul Stone. He’s on the hunt for a fifth site in Manchester, but is finding it difficult. “There’s just so much competition from the multiples,” he says. “There are virtually no good sites in the city centre left and we’re now looking further afield to the suburbs where there are a few potential pub sites.”
The right site
Off-street parking - it may make your search more difficult, but if you can find a site with off-street parking it’ll be a massive bonus for your business. Steve is a big advocate of this. “If you can get a site with some space at the front, it’ll attract more passing trade, especially with so many towns introducing parking charges.”
Size matters - all of Sanjeev’s sites are under the 3,000sq ft threshold to ensure there are no Sunday trading restrictions and that the current tobacco display ban doesn’t apply. “We always want to get the most out of our sites with as few restrictions as possible, so we look for 3,000sq ft or less sites,” he says.
Customer base - no matter how good the site may be, it’s worthless without people to shop there. “Look for locations with plenty of chimney pots around,” says Rodell. “The most popular sites are those in an area with lots of homes, with a mix of demographics so that you’ll get people doing their weekly shop as well as top-up shopping,” he says.
It’s no secret that pub sites are prime locations on which to open stores, and the demand has led to bidding wars between multiples and independents. The fact that no planning permission is needed also means that a store can be opened with less red tape, making them even more lucrative as sites.
Although the big boys may have deeper pockets, Rodell is adamant that independent retailers can move quicker and have better local knowledge to use to their advantage. “Assessing whether or not a pub site would be a good return is actually a painful and drawn-out process for larger operators, and favours independents,” he explains. “When a multiple operator is looking at sites, they’ll have to look at what’s around in terms of competition, population and amenities before deciding, and this takes time. However, an independent retailer might know the area well and be able to make a more informed decision on the potential for it.”
Sanjeev agrees, but urges retailers not to rush in just to beat the competition. “We may not go through the same level of checks that a multiple would, but there is still research to be done,” he says. “Sites may have once been chosen on gut instinct, but this is no longer the case. We need to know that there are enough chimney pots nearby to justify opening a store and a lack of competition. We have more flexibility than the multiples, but we certainly don’t go in blind.
“Quite often it comes down to who finds the site first,” adds Sanjeev. “Try to build a relationship with the agents so that they know what you’re looking for and can contact you as soon as something comes on the market.”
He advises retailers to pay close attention to other potential sites in the area as they may become the home of future competition. “Always look at the competition that’s there now and think about what could potentially turn up,” says Sanjeev. “If you’re buying a site, have a look to see what other sites are nearby and identify any struggling pubs. If there’s a chance a multiple could open up nearby then we’re less likely to go for it.”
Steve agrees with this advice. “If there’s an empty site on the same street, there’s a good chance it could become a multiple,” he says. “And if one moves in then a lot of your hard work could be completely undone.”
Steve says that a retailer shouldn’t set their heart on one site, but rather investigate several to ensure that they’re not left empty-handed. “There’s a lot of competition out there so you have to move fast. There’s no point in just focusing on one site, so have an idea about another in case your first preference falls through.”
Rodell believes that rather than there simply being a lack of sites for retailers, there is a lack of quality sites on the market. “There are plenty of sites but they’re not always suitable for the convenience market, or they have a peak turnover that isn’t what the buyer is looking for,” he says. “The challenge is finding the good stores.”
A big question that a prospective buyer must ask themselves is if they’d rather buy the freehold, or lease the site. Steve sees advantages to both and believes it comes down to an individual’s finances. “I would never rule out leasehold, as it can free money that may otherwise be tied up if you buy the freehold, which comes in handy for when you want to actually open the store,” he says. “You’re paying rent to someone else but you’re also seeing a return quicker. Also if you can’t afford the freehold, it may be too good a site to pass up so a leasehold may be the best solution.”
He debunks the myth that leasehold is less of a commitment to a business. “It’s just as big a commitment,” says Steve. “The contract will be long-term so you can’t just give up with a few weeks’ notice. The advantage of having the freehold is that you can do what you like with a site, plus you’re not paying rent to anyone else.”
Paul says that if you definitely want to go down the leasehold route, don’t be afraid to play hardball with the landlord. “Make sure you get the best deal possible on a leasehold, with a decent rent-free period and a break clause after a few years to allow both parties the chance to be released from the contract,” he says. “Make sure that the rent you pay is reflective of the area. If there’s a lot of empty shops on the same street, you should be paying less.” •
Ensure accreditation - according to Christie & Co’s Rodell, it’s important to work with fully accredited agents. “Find out if they are Royal Institution of Charted Surveyors or National Association of Estate Agents approved as it will ensure a better and more reliable service,” he says.
High energy - it may seem ridiculous, but check that the premises are adequately supplied with electricity and water. “The last thing you want is to find there’s no power or water, then have to organise and pay for something that is usually a given,” says Paul. “Make sure it’s supplied properly and if it’s not take that into account when negotiating the price.”
Planning process - if you do buy, Rodell advises getting involved as much as possible with local planning policy committees. “That way, you’ll be able to find out if competition is coming and be able to react quicker,” he says.