After fulfilling the dream of home ownership, many Americans look to start their own business, whether it is a bistro, remodeling construction company, bakery, shoe salon, private medical practice to name just a few. Mega corporations are highly visible in Anchorage and Alaska but it is the small entrepreneur that contributes more to our local economy. According to the 2020 small business profile provided by the U.S. Small Business Administration, Alaska had 237,271 small business employees which consisted of 52.4 percent of Alaska’s workforce in 2020. There are no more recent statistics about how these numbers have or will continue to change as a result of the ongoing pandemic but I have faith that self-reliant Alaskans will find a way to survive the pandemic as we have survived and grown after two major earthquakes.
Collin Agni, Associate Broker with the Commercial Division of Berkshire Hathaway HomeServices Alaska Realty, recommends starting a small business in a walk-up neighborhood center, also known as a strip mail, because of higher traffic counts, visibility and accessibility. According to Agni, “Neighborhood centers typically draw their customers from a one to three mile distance and are often 30,000 square feet or greater with an anchor and smaller spaces for lease. Neighborhood centers are often configured as a straight line strip accessed directly from the parking lot.”
Typical square footage can be as small as 1,000 square feet for the new entrepreneur or up to 5,000 square feet for a larger anchor style tenant. According to Agni, “Depending on your use, the depth of the space is important. A narrow space, with a bowling alley style, is suitable for a nail salon where as a clothing retail store would want as wide a space as possible in order to demonstrate more merchandise closer to its entry.” This wide frontage is very similar to the highly desirable wide shallow style of residential homes. The building configuration dictates length and depth of the available spaces just like the size of a lot.
“Most neighborhood centers are typically about 30,000 square feet with an anchor and smaller spaces for lease.” Agni says the closer to the anchor the better visibility.
“Walk up space usually rents for $1 per square foot to $3.50 on the high end depending on visibility and traffic. Older walk up space can be as low as $0.85,” according to Agni. Just like in residential, value frequently depends on location, location, location. For example, popular areas with higher residential values command higher retail lease rates.
Often there are more costs than the rent per square foot. Most retail leases are triple net, meaning 100% of all taxes, insurance and maintenance associated with a shopping center is pro- rated amongst the tenants. In order to avoid lower costs, look for a neighborhood center that is a straight-line strip with no enclosed walkway or mall area.
Other terms to negotiate include tenant improvement allowances. The length of the lease will normally dictate the amount of the tenant improvement allowance. Typical TI’s include, paint, flooring, construction, but not signage or tenant fixtures or equipment. And, according to Agni, “Don’t forget to ask about renewal options and free rent. Be sure to take into account the construction time to perform the tenant improvements which should be rent free. Plus, some free rent can often be negotiated as part of your lease term. Today’s retail market has a lot of opportunities for the start-up entrepreneur.”
I want to thank Collin Agni for his contribution to this article. For more information, please feel free to reach out to Collin at 907-952-1818.