3 Important Things To Take Note When Taking Up Rental Space

With evolving customer taste and preference, more and more business enthusiasts and entrepreneur wannabes are taking the chance to jump on the bandwagon in the hopes of becoming the next big brand. While many retail brands have taken to the e-commerce space, using social media platforms and the internet to market their products, the idea of taking up rental space in a physical store still sounds pretty exciting, giving a sense of ownership, pride and legitimacy.

However, we have all heard plenty of dismayed tenants who got the shorter end of the bargain when renting a space, from unruly neighbors to unexpectedly poor customer footfall. The landlord’s agent is unlikely to be your fiduciary, so what are some things that you must definitely know before putting down the security deposit for a unit? Let this article serve as a guide the next time you go shop-hunting to save you the heartache later on!


As with every business, the key is profits and sales. Before you and your business partners hit the streets or search on property websites, it is important to first note the expectations of your business. These expectations should include breakeven levels (i.e., profit and loss), business plans (e.g., future expansion) and your target audience amongst other considerations. It is key to ensure that these expectations are stated clearly, because they will guide one’s search for the perfect property. Once you have these ready on hand, pack your bags because you are ready to begin your hunt:

Keynote #1: Footfall Is King

Have you been to one of those malls that are eerily quiet even on weekends? Or those that carry a subtle odor with dim lightings that just makes the place so unattractive? You probably should strike these locations of your list in a heartbeat. The mall being already unattractive to you, it is likely that your target customers would share the same sentiments. Especially for startups and business models that have yet to incorporate technology and social media marketing into their business strategies, reliance on footfall for client conversion is highly important.

For malls that are quiet even on peak hours, it indicates either a jarring lack in the mall, or that it is an undiscovered gem, the first being the most likely reason. We suggest speaking to existing tenants who have stayed there long enough to interpret and analyze customer behaviors and patterns in the mall of interest, or even asking the security guards who work there and have a good sensing of what happens in the mall on the day-to-day basis! Trust in your own guts and instincts, coupled with proper surveillance of the vicinity to aid your assessment of the rental prospects because the landlord’s agent facilitating the sale is unlikely to provide you a truthful and honest account when it comes to searching for a space!

Keynote #2: Love Thy Neighbor

Take a good look at who your neighbors are, from the goods and services they provide, to the demeanor of the tenant himself. You would want neighbors who complement your trade, rather than oppose it. In most cases, it is common sense to avoid a red ocean situation where you are surrounded by many competitors vying for the same pool of customers by offering similar goods or services. This makes it far more difficult to stand out as a new entrant to the game. However, there are some cases in which some competition can be good, especially if you believe the good or service that you provide can rival existing competitors in terms of price, quality or both.

For example, a new coffee brewery joint takes up rental space on the same floor as two older coffeeshops, offering greater ambience and more aromatic coffees at rivalrous prices. Naturally, existing clients that frequent the two coffeeshops may gravitate to the new coffee joint just next door because there is greater value and customer experience to be enjoyed. In such cases, setting up in your competitor’s territory may prove to be favorable because you ride on existing customer footfalls brought in by your competitors previously! However, such a risky move requires proper considerations and risk management in the case that the intended outcome is not fulfilled.


Another point to consider when looking at your neighbors, ensure that their usage complements yours. For example, a tuition centre catered for younger children should avoid taking up rent beside a sleazy massage parlor to maintain brand image. Newer malls that are constructed tend to conduct strict tenant screenings to ensure that the mall’s image is congruent and streamlined. However, older malls such as Bukit Timah Shopping Centre and Beauty World Centre may not require such practices.

Keynote #3: Consider Potential Pitfalls Of Rental Space

If your landlord is asking for progressive increments in rental over the years, you might want to reconsider your business game plan! Upon doing the math and realizing that rental payments are set to increase by significant amounts each time, such as 5-7%, you might want to give such units a miss unless you can guarantee that your business is able to stomach such costs over the long haul. Should you really take a fancy to the unit despite the rental payment clause that comes with it, we suggest setting a stop-loss to hedge against business losses.

On the other hand, if a rental space is too cheap to be true, it probably is. New business entrants may jump at the sight of a cheap rental unit because it spells lower overhead costs, minimizing business risk. However, such a questionably good deal often comes with some unknown defect (e.g., dysfunctional air conditioning, rowdy tenants) that is unlikely to be presented to you at face value. It is key to do your own homework prior to signing a lease, start by searching up on readily available data via property websites such as SRX and URA that provide past registered rental details, to give you a good gauge of the market value of the property in question!

Starting a business can be very exciting but requires a substantial amount of research and planning prior to execution. We hope that this article will serve as a useful guide the next time you decide to kickstart your bakery or tapestry brand!

Jo'An Tan
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