Selling Retail Space: Tips for a Successful Transaction

Want to sell your retail property? See the sales guide with valuation, a document checklist and points to consider when selling with tenants.

A market in transition

The retail market is no longer what it was. Online shopping has fundamentally changed the playing field, and the pandemic has only accelerated that shift. For owners of retail space, this raises questions: is it time to sell? And if so, how do you achieve the best price in this changing market?

In this article, I share the insights and strategies you need to successfully sell your retail space. Not with the illusion that it is easy, but with a realistic view of what works.

Facing reality

Let's be honest about the challenges. The growth of e-commerce has put pressure on the demand for physical retail space, especially in weaker locations. Vacancy in some shopping areas is a real problem. Rents are under pressure.

But – and this is important – there are also opportunities. Experience retail is growing; shops that offer an experience you cannot replicate online are doing well. Mixed-use concepts, where retail is combined with hospitality and services, are on the rise. And for A1 locations in strong shopping centres, investor interest remains undiminished.

The question is: where does your property stand in this spectrum?

Value in the retail market

The value of retail space is determined by a combination of factors, some of which are influenceable and others not.

Location is king. A1 locations – think of the high street in a city centre, or a prominent spot in a successful shopping centre – retain their value. A2 and B locations have it tougher. You cannot change this, but you can take it into account in your expectations.

The lease agreement is crucial for investors. A long-term contract with a solid tenant is worth its weight in gold. A short-term contract, or worse, vacancy, depresses the price. If your contract is nearly expiring, it may pay to first negotiate an extension with your tenant before you start selling.

The condition of the property also counts. A well-maintained facade, a well-kept interior, modern installations – it all makes a difference. Investing in a paint job or repairs can pay for itself twice over upon sale.

Knowing your buyers

Who buys retail space in the current market? Three groups are interesting.

Investors seek yield. They look at the rental income, the quality of the tenant, the duration of the contract. They are price-sensitive and perform extensive due diligence. A stable, predictable income is what attracts them.

End-users buy to use for themselves. Often local entrepreneurs who want to convert their rental costs into wealth accumulation. They often have specific requirements and are sometimes willing to pay a premium for the perfect property.

Developers look at potential. Can the building be transformed? Are there extra building rights? Can the zoning be changed to, for example, residential? They look at the future, not the current situation.

Tailor your presentation and approach to the most likely buyer.

The presentation

In retail, presentation is everything. This also applies to the sale of your property.

Physically, the property must look well-maintained. A clean facade, clear shop windows, an inviting entrance. If there is a tenant in place, consult with them about a temporary spruce-up.

Digitally, the presentation must be professional. High-quality photos, a clear floor plan, preferably a virtual tour. Potential buyers form their first impression online; make sure that impression is good.

And don't forget the information. Clear rental data, an analysis of the location, insight into footfall, an overview of development possibilities. The more relevant material you can provide, the more serious you come across.

The timing

When to sell? It is a question without a single answer, but there are rules of thumb.

If you have a strong lease agreement, preferably sell shortly after renewal. The security of a long-term contract is at its maximum at that point.

If you are facing vacancy, consider whether transformation is an option. Selling a retail building as a potential residential location can sometimes yield more than as retail.

And follow interest rates. Rising interest rates depress property prices; falling interest rates stimulate them. This is not an exact science, but it does influence buyer sentiment.

The endgame

Selling retail space in the current market requires realism, preparation, and a good strategy. It is not a simple process, but with the right approach, a successful transaction is absolutely achievable.

Want to know more? Read about selling a property or request advice.