0.7 acres in Kroger anchored center, lease to National tenant, starbucks etc

[Nilesh Jethwa]

I happen to own a small parcel  in a shopping complex that has great demographics and is always busy.  

I have been told by few brokers that national tenants need 1 acre to even consider it.

I wonder what tenants might be appropriate for this location. This land is CBD and my neighbour has a approx 5000 sqft building on the same size parcel. 

So is a 5000 sqft building small for national tenants to consider? It is CBD zone so any business including drive thru can operate here. 

I am open for ground lease or BTS options but how do I reach out to the right department heads. I think a Starbucks, Dunkin, Pizza or a small bank or credit union branch would really thrive in this location. The shopping center has several businesses including Kroger,  Goddard School, Truist bank, Ozk Bank to name a few..

Any advice how to proceed, whom to contact?

[Jamie Hora]

There are plenty of tenants that can accommodate with a < 1 acre lot. You are in line with your thinking on some newer banks and/or coffee drive through shops.  There are drive-thru only coffee shops with buildings ~500 sq ft.  The main challenge with some of these are the dimensions of your lot and configuring the site to allow the minimum stacking of vechicles.

Depending on your use, a 5000 sq ft building may be tough to fit in this size lot when looking at how much parking you want/need, building setbacks, landscaping setbacks etc.   

[Nilesh Jethwa]

@Jamie Hora, Thank you for your feedback. I believe city codes might have changed and the actual building size could be somewhere ~4000 sqft. 

Should I go after single tenant or multi tenant? I have seen few locations where a Dunkin is on one side and a bank on the other side (2 tenant building). 

I am not sure where to begin with such ideas?

[Jamie Hora]

I am not sure on single vs multi-tenant options, that is outside of my experience. I believe you would look at market analysis of what tenants would be in each of those scenarios and compare the proforma on each. 

[Steven McPherson]

You local commercial brokers who have experience in that market would be the best ones to talk to.  Find one that is a member of the International Council of Shopping Centers, whom all of those national tenants are a part of and are in the database.  I have experience with this in my market in DFW, TX and I'm available for DM if you would like some guidance from afar.

[Joel Owens]

Hopefully you did not pay too much for the dirt. 1 acre is optimal these days because of desired double to triple drive thru for QSR.

It can become a problem because if they make the building smaller you get less rent but they do more sales.

Example a QSR used to be 3,000 to 4,000 sq ft but now instead wants double drive thru's as not many go inside for fast food like pre-covid.

If you get 1,000 a foot less at 30 a foot you just lost 30k NOI and now at 5 cap example paying all cash NNN once developed you have lost 600k value.

It can fine as long as you do not overpay for the land. If you paid like 750k or 1 million that could put you in a bad spot if tenant wants to own the dirt rather than lease.   

[Michael K Gallagher]

depending on what your volumes and stats on that kroger are, and its its actually an OP for that kroger then the .7 is enough for an urgent care to build on.  we work with a multi state operator to find new sites and we generally target .6 - 1 acre for our buildings, but they are single tenant free standing buildings.  We've done buy and builds ourselves or can do BTS's but retail medicine in general has a hard time making the debt on a ground lease work, so if you are looking to do that the medical space is likely not the user for you, but if you were looking to BTS or to sell, its a solid end user to work with.