15 October 2019/ rent_retail_guide

How much does retail space cost?

The cost of renting or buying retail space in the UK varies from city to city. As you might imagine, setting up shop in London will cost considerably more than in other areas, so it’s important you can justify the extra expense.

When you look for average costs, most companies will advertise their spaces with a price per square foot or square metre. This means you can easily compare the cost of all your options to find the best deal for you.

You’ll need to keep your budget in mind and work out how much you can afford to spend on your property. Your business probably won’t turn a profit for the first few months as you continue to pay off your initial expenses, so make sure you have enough capital to cover your rent or mortgage for at least several months.  

Remember, you’ll want to find a retail space that suits your brand as well as your budget. Consider your target market, where they shop and how they travel. It’s vital you balance these considerations with your financial limitations if you want to start a profitable and popular business.

The average cost of prime retail rent in the UK (2019)

In general, the cost of retail space increases in large towns and cities. It’s impossible to pinpoint the exact rent or asking price you can expect to pay in every UK location, but these cities have the highest average costs in the UK:

Region

Average annual cost per square metre

London (West End)

£14,355

Glasgow

£2,340

London (City)

£1,898

Edinburgh

£1,609

Manchester

£1,545

Leeds

£1,355

Birmingham

£1,139

Cardiff

£1,030

Surprisingly, retail space in Glasgow is even more expensive than in London City, while Edinburgh has the fourth highest retail space rent. The Midlands and the north of England also have valuable retail space, which can be found in Manchester, Leeds and Birmingham.

What should I factor into my monthly costs?


  • Rent or your mortgage will, of course, be one of your biggest expenses. You should make sure you have saved enough capital to cover these payments for at least several months. Many business owners like to make sure they have enough money for two years’ worth of rent or repayments, just in case the venture is not as profitable in the initial stages as they hope.

  • Licences, permits and insurance should also be factored into your budget. Depending on the type of business you start and its location, you will need to pay different licence fees and buy insurance, such as employers’ liability and commercial property insurance.

  • Professional services are something many prospective business owners forget to consider. You may decide to hire a lawyer to incorporate your business or an accountant to manage your finances. There is no standard cost for these services, so you could end up paying several hundred or several thousand pounds, depending on your situation. If you choose to use ongoing professional services for bookkeeping, tax returns, payroll or advice, you could invest in a package deal for a fixed monthly fee. Small businesses are generally charged between £60 and £250 per month, but it’ll depend on your location, turnover and services.

  • Utilities will be another of your significant ongoing expenses. Water, gas and electric are vital to any business, but you may also want to invest in telephone and broadband services – particularly as free wi-fi is a major selling point for any business.

  • Furnishing your premises may cost more than the average office or industrial unit fit-out, but it’s a key consideration for all retail business owners. As well as the basics like signage, flooring, shelves and tills, you’ll need extra furniture depending on the type of retail business you’re starting. You could choose to buy ottomans if you sell shoes, or put chairs in the changing rooms of your high-end clothing store. If you’re starting an independent business, you can invest as much or as little as you like in décor – going all-out or keeping things minimal – as long as your theme matches your brand identity.

  • Stock is the beating heart of every retail business. It may be difficult to predict how quickly different products will sell, but you should try to buy enough inventory to cover you for up to four months.

  • Technology and equipment will also be vital to your business. Factor point-of-sale (POS) systems and mobile payment platforms into your budget, along with digital screens and CCTV systems if you need them. Depending on the type of POS system you buy, you will pay between £300 and £1,500, or £20 and £35 per month if you lease it.

  • Website hosting will help you get your business out there in your target market. In the UK, you could pay anywhere from £3 to £200 per month, depending on whether you opt for shared, virtual private server (VPS), cloud server or dedicated website hosting.

  • Employee salaries will be a major part of your monthly budget and, of course, this expense will depend upon how many workers you hire and how much you pay them. If you hire a manager, you may not have the funds to pay yourself as the business owner, so only pay yourself if you’re physically working in the store on a day-to-day basis.

  • Cleaning is important if you’re to continue attracting customers into your store. Most commercial cleaners charge between £10 and £20 per hour, so you’ll need to factor in higher costs if your retail space is large and will take a long time to clean.
  • Advertising can be extremely expensive or completely free. The amount you pay will depend on whether you want to launch extensive advertising campaigns with billboards and television and radio spots. To save money, create effective social media profiles and interact with your customers regularly.

  • Extra expenses will include items such as office supplies for your till points. These should have a relatively small impact on your monthly budget.

What extra rental costs can I expect?

Depending on your landlord, you may be charged some extra monthly fees on top of your rent. Three of the most common go towards:

  • Common area maintenance (CAM) – This covers the cost of maintaining the building and any outside space such as the car park.
  • Tax – You’ll need to pay tax on your business premises.
  • Insurance – The landlord may take out a policy to protect against damage to the building you’re renting and hand the cost down to you.

Often, landlords will incorporate these three main costs into your rental agreement as a “triple net” lease. Expect this type of contract to be up to £200 more expensive than ones that add these extra costs separately. However, you should always get in contact with your landlord to negotiate the terms of your rental agreement, as you may be able to minimise some of your monthly expenses.

Can a retail business survive without a brick-and-mortar store?

Nowadays, more and more shoppers are heading online to tick off their retail wish lists. You could eliminate the cost of running your store from retail premises by operating through a dedicated website – as long as you can attract your customers in the first place. 

Alternatively, you could opt to set up a shopping mall kiosk or a stall at a local market. These business models work particularly well for companies that offer a seasonal product, as you can make the most of the high demand during certain months and focus on developing your other income streams the rest of the time without having to pay year-round rent.

How do I find out how much I can afford to spend on retail space?

The best thing you can do to work out how much you should spend on retail space is create a business plan. Note down your intended overall budget and calculate your initial and ongoing expenses. When you’ve estimated how much income you’ll make in the first few months, you’ll be able to find your break-even point – the moment you will start turning a profit. When you’ve made these financial projections, you should be able to work out how much you’ll be able to spend on rent and other related expenses without significantly delaying your break-even point.

Armed with a solid business plan, you’ll be able to approach lenders to borrow the capital you need to get your start-up off the ground. They’ll want to be able to see that your business is viable and that you’ll be able to keep up your repayments into the future.

What are my options when borrowing capital?

Most business owners need to borrow money to get their business up and running. There are two main ways of doing this:

  • Equity financing
  • Debt financing

Debt financing is the more suitable option for most entrepreneurs, who take out a business loan from a bank or other official lender. Depending on the type of agreement you sign, you’ll either be stepping into secured or unsecured debt. If you choose the former, the loan is secured against your own assets, such as your home. So, if you cannot keep up your loan repayments, you may be forced to sell your property or possessions in order to return the money to your lender.

Find your perfect retail space

To browse retail space currently on the market and find your ideal business premises, see our selection of properties up for sale or available to let.