A rental price for a retail space is too high when it is disproportionate to the location, the expected revenue potential, and the current market rents in comparable streets or shopping areas. As a rule of thumb, rental costs should not exceed 10 to 15 percent of the expected annual turnover. The questions below help you assess whether an asking rent is realistic and what you can do if it is not.
How do you know what a market-conform rent is for a retail space?
A market-conform rent for a retail space is the price that comparable tenants in comparable locations are actually paying right now, based on recently concluded lease agreements. That price varies significantly by city, street, and location type. A prime A1 location in Utrecht commands a different price than a secondary location in a mid-sized city. Without access to current transaction data, it is virtually impossible to accurately assess this on your own.
The rent per m² for a retail space is determined by a combination of factors: footfall, the visibility of the location, the retail mix in the surrounding area, and the size of the space. Smaller units typically have a higher price per m² than larger stores on the same street. This makes direct comparisons difficult if you do not know which adjustments to apply.
KroesePaternotte maintains a database of lease transaction data dating back to 1984 and covering virtually the entire Dutch retail market. No other agency holds comparable historical transaction data at street level. This enables them to quickly assess whether an asking rent is market-conform — not based on assumptions, but on what comparable properties in the same area actually achieve.
What are signs that you are paying too much rent for a retail space?
Signs that the rent for a retail space is too high include: the rent per m² is clearly above the average for comparable streets, the landlord refuses to negotiate or to explain how the price was determined, and surrounding properties remain vacant for extended periods without rents being adjusted.
Other concrete warning signs are:
- The landlord is applying a rent that has not been reviewed for years, while the market has declined
- Service charges are high and poorly specified, causing the actual rental burden to be much higher than the base rent suggests
- Comparable spaces on the same street or in the same shopping centre are being offered at lower prices
- The location is officially classified as a prime location, but footfall has declined significantly in recent years
A lack of transparency is in itself a warning sign. A professional landlord can always substantiate the asking rent with recent reference transactions. If that substantiation is not forthcoming, further investigation is warranted.
How does the rent relate to the expected turnover of a retail store?
The rent for a retail space must be directly proportionate to the expected turnover. In the retail sector, the guideline is that the total rental burden — including service charges and VAT — should not exceed 10 to 15 percent of gross annual turnover. If you structurally exceed that threshold, the rent will put pressure on the profitability of the store.
This principle is also known as the rent-to-sales ratio. The rent-to-sales ratio varies by sector. A supermarket or drugstore operates on thin margins and can generally sustain a lower rent-to-sales ratio than a jeweller or a fashion boutique with higher margins per product sold. It is therefore not just the absolute rent that matters, but the relationship between the rental burden and the revenue potential at that specific location.
In practice, this means that before signing a lease you need to draw up a realistic revenue forecast for the location in question. Footfall, the shopping public in the surrounding area, and competition all play a role. A location that appears more expensive on paper may in practice be more attractive if the revenue potential there is proportionally higher.
What can you do if the asking rent is too high?
If the asking rent for a retail space is too high, there are several options. You can directly challenge the price with a substantiated counteroffer based on market data, negotiate additional concessions such as a rent-free period or a lower initial rent, or decide to walk away from the location and continue your search.
Negotiating rents is very common in the retail market, but requires preparation. A landlord will take a counteroffer more seriously if you can demonstrate what comparable spaces in the area cost. Without that substantiation, your negotiating position is weak.
Concrete steps you can take:
- Gather reference transactions for comparable properties on the same street or in the same retail area
- Calculate the rent-to-sales ratio based on a realistic revenue forecast for the location
- Submit a written counteroffer with explanation, so the landlord can see that you know the market
- Negotiate not only on the rent but also on the terms, such as a rent-free start-up period, a break option, or a shorter initial lease term
- Engage a specialist retail agent if the landlord does not move
A specialist retail agent such as KroesePaternotte negotiates on behalf of the tenant based on current market data and knows the room for manoeuvre that landlords apply in practice. This delivers a better outcome in many cases than negotiating independently, especially if you are not yet well acquainted with the market.
When can you request a rent review for an existing retail space?
A rent review for a retail space can be requested when the current rent is no longer in line with the market rental value at that time. Under Dutch tenancy law, both the tenant and the landlord may demand a rent review after a period of five years, based on comparable reference properties in the area.
In practice, this instrument is used more often than many tenants realise. If the market has declined — which has been the case in various retail areas in the Netherlands in recent years — a tenant can enforce a lower rent through the courts or through amicable consultation with the landlord. The condition is that you can substantiate the lower market rental value with recent, comparable transactions.
KroesePaternotte carries out rent reviews on behalf of both tenants and landlords, working in accordance with the standards of RICS and the Dutch Register Vastgoed Taxateurs (NRVT). The combination of the largest retail valuation department in the Netherlands and a lease transaction database dating back to 1984 makes it possible to accurately substantiate the market rental value, even in less prominent retail areas outside the major cities.
Do you suspect you are paying too much rent for your current retail space, or would you like to know what a fair rent is for a space you are considering leasing? Contact KroesePaternotte for an objective assessment based on current market data.
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