Rent & Rental Negotiations

Here we break down the different types of landlords you may encounter and give you tips on negotiating including how to pitch your business to landlords.

Landlord Types

Vacant properties cost all landlords time and money, which is where you can take advantage and demonstrate your ability to increase their revenues, improve the image of their property, and help them to get permanent tenants.

Each type of landlord has their own unique set of requirements, desires, and restrictions:

Corporate Landlord

Corporate Landlords own multiple properties, have more / heavier legal requirements, and usually have shareholders that they report to. Their main concern is profits, and maximizing the value of the shares of the shareholders.

A Simple or Full Business Plan may be required to rent a space from a corporate landlord. Highlight your ability to be flexible, attract more foot traffic, and improve the image of the landlord and their property, while demonstrating your ability to properly plan for a successful pop-up if you want to gain their attention and goodwill.

Remember that corporate landlords’ number one goal for a vacant space is to find permanent tenants, and that your pop-up shop can either develop into a permanent store, or attract the interest of new tenants that are looking for a permanent space.

An ideal type of agreement / contract to use in this case is a license agreement and to have all your legal documents outlined before pitching your idea.

Property Management Group

Property Management Groups typically only manage properties for the owner. They handle leasing / rent, maintenance, and tenant relationships rather than focusing on owning properties themselves. Offices, malls, plazas, and other larger retail spaces are more often managed by property management groups as opposed to the owners.

This presents an opportunity for you to pitch your pop-up shop as filling a vacant space and therefore improving the overall appearance / image of the property as a whole. More foot traffic, more sales and customers, and happier landlords can be powerful negotiating tools when approaching property management groups.

Similar to corporate landlords, having all your legal documents before the pitch is important, as is your ability to demonstrate how your pop-up shop will improve the overall experience of customers who visit their property.

Independent Landlord

Independent Landlords typically own one to two properties, although it is not uncommon for them to own several properties. They don’t have shareholders to report to, hire small companies to manage their property (unless they decide to do so themselves), and are more interested in the long-term stability of the income generated by the property than short-term profits.

Reaching independent landlords often requires a mix of good planning and a great pitch that tells a story.

What’s Common Among All Landlords

All landlords worry about both short-term profits, and long-term stability. What’s important for you as a pop-up shop entrepreneur is to identify which is more important to the landlord you are approaching.

A vacant space can be unsightly, dissuade people from visiting nearby stores, and drive other businesses away. Landlords of all types want to see their spaces filled with a positive, engaging, and busy store that has happy customers.

All landlords want to work with someone that is easy to get along with, is knowledgeable about their industry, and especially the local neighborhood that they want to occupy.

Understanding the desires, habits, and characteristics of the local peoples around a space that you want to rent is paramount to convincing a landlord that you will make good use of the space.

Being flexible with the timing of your pop-up shop (such as when you want to open), the requirements you have of the vacant space (such as its condition), and the terms of your agreement (such as the rent) will demonstrate your willingness to work with the landlord.

Having a positive attitude in your negotiations with the landlord also reflects on how you will treat your customers. Landlords want someone who treats customers with respect and goodwill to be their tenants, as that is a reflection of their property and ability to choose the right person to fill the space.

If at all possible, demonstrate what you are selling to the landlord. Perhaps you are selling baked goods, novel clothing, or vintage toys. If the landlord can see, feel, and experience what value you are planning to provide your customers, they can either identify that value and make the negotiations easier, or help you to better refine your product or service to meet the unique needs of the local population.

Rental Agreements

Various types of rental agreements exist, and corporate landlords and property management groups will most likely have their own existing agreements. In these cases, ask for a sample or a blank agreement to better help you prepare for the negotiations. When approaching independent landlords, you may have more flexibility in the negotiations in general.

Some examples of rental agreements that you may encounter are:

  • Subsidized Rent: In which you pay a reduced rate of rent. This may be based on number of days you will be there or the costs for the empty space.
  • Percentage: In which you pay rent as a percentage of sales. This may be combined with a subsided rent.
  • Barter System: In which you trade products or services in exchange for subsidized rent. This is one the least common forms of rental agreements, but it still exists.

Negotiating Rent

We have compiled some important tips to help you negotiate the best rental agreement with your landlord.

  1. When presenting your pop-up shop to a landlord, tell the story of the inception of your idea, what value it adds to the customer, and how it will benefit both the landlord and the local community. The key here is to be able to tell a story, and make it about something that is meaningful.
  2. Be prepared to share the Business Model Canvas and the Simple Business Plan to the landlord. This demonstrates your ability to research, plan, and identify opportunities that will help make your pop-up shop successful. Remember that your success is a success for the landlord as well.
  3. Have a clear and detailed understanding of the financing for your pop-up shop before you engage in negotiations. Being able to quickly and accurately discuss your expected costs, payback-period, cost structure, and expected profit levels builds your credibility, and helps to demonstrate your need for a good rental rate.
  4. Have a one-page report highlighting the direct benefits to the landlord including a clean retail space, increased foot traffic, additional income, and the potential for more future interest for permanent tenants.
  5. Use the case studies from this and other sources to help make your point about the value of a pop-up shop to the landlord, their increasing popularity with younger consumers, and the goodwill it generates within the neighborhood.
  6. Give the landlord adequate time to review your Business Model Canvas, Simple Business Plan, and if applicable, your Full Business Plan. A pop-up shop may be a new idea to them, and they may need more time to do their own research into the idea. Follow up in a few days and offer to answer any questions they may have.