You buy a prime location per visitor, not per square meter
Prime locations are priced on footfall. When footfall drops, you are paying for visitors who are no longer there. How to keep track of it.
A prime location costs a multiple of an ordinary one. Anyone renting one knows that, and usually it is worth the money. What rarely gets said is what you are actually paying for.
You are not paying for the square meters. You are paying for the people walking past.
That sounds like wordplay until you turn it around. If the number of people walking past drops and your rent stays the same, your rent per visitor has quietly gone up without a single line of your contract changing.
Two movements at once
The awkward part is that two things happen at the same time, both slow enough to go unnoticed.
The first is indexation. Your rent rises a few percent every year. In Belgium that is a legal mechanism tied to inflation, which many countries do not have. It is never a shock, it is always an amount you assume comes with the territory. Five years on it is no longer a detail.
The second is footfall itself. Shopping streets and shopping centers have lost visitors over recent years, some of them heavily. That decline does not happen in a month, it happens over years, and it feels like a bad patch rather than a structural change.
Put those two together and you have a cost that rises against a base that shrinks. That is the arithmetic you want to see before you feel it in your result.
The number you want
Rent per visitor. Nothing more.
Take your annual rent including all charges, divide by the number of visitors that year, and line that series up across five years. If the amount rises while your average spend per visitor stays flat, your location is under pressure, however well the rest of the business is running.
Add two figures to that: your conversion, meaning what share of visitors buys something, and your IPT, the number of items per transaction. With those three together you can take any drop in revenue apart. Did fewer people come in? Did just as many come in but fewer of them buy? Or did they buy but less per visit? Those are three different problems and they need three different solutions.
Without footfall you never know. You only see that revenue is sliding, and you go and turn the wrong knob.
Where do you get footfall numbers
In practice this is the hurdle. In a shopping center you can often get the figures from the management, though sometimes you have to ask and they are not always pleasant to receive. On a shopping street you can count yourself with a sensor, and that is cheaper than most people think.
Something that also works as an interim solution: plot the number of transactions per hour against your opening hours. That is not footfall, but the pattern it produces does tell you when it is busy and when your staff is standing around waiting.
More important than the perfect measurement is that you consistently measure the same thing. A series that is consistent with itself is usable, even if the absolute number carries some noise. A series that switches method halfway through is not.
What you do with it
Two things, and the second is the interesting one.
The first is internal. Your staffing should follow your footfall pattern, not your habits. Plenty of businesses staff Monday morning the way they did ten years ago, while the center of gravity of the week has shifted. That is wage cost spent at the wrong moment.
The second is external. If you can demonstrate that footfall at your location is structurally declining, you have a conversation with your landlord. Not a discussion about feelings, but a series across several years.
I did this myself. Not with my profit and loss account under my arm, because a landlord is not interested in that and it only hands him ammunition. I went in with the center's footfall figures, plotted across the years. That changes the tone of the conversation entirely, because you are no longer arguing about whether things are worse, you are only discussing what to do about it.
What it is not good for
Falling footfall is not a free pass. If your conversion is dropping at the same time while your neighbors stay flat, it is not the location. You want to know that yourself before you walk into a negotiation, because the other side sometimes has those figures too.
And giving up a prime location because rent per visitor has gone up is rarely the right conclusion. The point is not that you have to leave, the point is that you know before it hurts.
The claim
Rent is not a fixed cost. It is a price per visitor that changes every year without anyone telling you.