How bad is Retail doing?!? 5 years FREE RENT!

Question

I just saw this sign while I was shopping in a nice retail area in Burbank, CA last month and couldn't help but take a picture and post it here. Can this be correct 5 years free! I am assuming they must be requiring a 25 year lease agreement or something. Is this common?

Joel Owens · Answer

Terms and conditions apply.

Nothing is FREE. The cost is built in somewhere to what they are doing.

We get landlords offering free rent here for 1 year.The rent isn't free on commercial as they then have year 2 at a higher than normal rate to recover some of the lost rent and then built in escalations that are higher and more frequent than normal.

Never get sucked in by a gimmick.I tell all my clients to be slow and methodical in doing  a deal to avoid "knee jerk" reactions.It takes a long time to make money and a small amount of time to lose it.

You also have to watch out for if they are in pre-foreclosure or not.They could be trying to collect an upfront payment with free rent and then walk.

Don Konipol · Answer

First five years rent free with non refundable $150,000 deposit!

Jim S · Answer

The trend in the Maryland/ Virginia area is to only offer 10 year leases on retail zoned commercial. We looked at a few properties that were only willing to offer 5 years. The rents would then adjust to market rate....good luck with that one.

Kofi LeGrand-Sawyer · Answer

It looks like retail is doing better http://mobile.reuters.com/article/idUSL2E8I59XB20120706?irpc=43

Michael D. · Answer

You could put together a 5-year business plan - which ends in bankruptcy. In the meanwhile you can just take the profit out of the business.

Dave M. · Answer

...Free rent but the NNN are $70/ft

Andy B. · Answer

I would bet this building has 15,000 square feet of hard to utilize area -- warehouse space in primary retail area, second floor area, back lot, etc.  So, if you rent the high dollar retail space for 5 years, you get 15,000 "extra" space.

Kofi LeGrand-Sawyer · Answer

The owner might be in a position to offer 5 years free if there's no loan on the property. I would think they're looking for a corporate tenant on a 10-25 year term.

Tamas Zalabai · Answer

Wow, this is insane.

Andrew Jones · Answer

No, I did not inquire about the small print as I don't invest in retail space.

How bad is Retail doing?!? 5 years FREE RENT!

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