Commercial Rents and/or Leases

8 Replies

I just have a quick blanket question for you Commercial landlord folk.

I have a project that I've been working on that may require a little commercial at the street, while the bulk of the parcel will be a multi-family type of set up. I'm trying to keep the cost for the residential part fairly low to rents can be affordable for people.

Having the commercial aspect could help offset the overall cost of the development. I'm very unfamiliar with commercial things and don't know what an average lease would be for a couple units (like a Starbucks or Chipotle) or maybe even a small store, like natural grocers.

Thoughts?

With humble gratitude, 

Joe

@Joe Callantine

Two components to think about.

- rent per square foot

- tenant improvements

The rent you can get will be on a per sq foot basis, so if you charge $20 per sq for a 2k space rent will be 40k. In some instances the lease will be NNN where the landlord does not pay maintenance

You will need to offer the tenant concessions, or TI to entice the tenant to build out their space.

Both rent and TI are market and location dependent

This would ultimately be a new construction. I assume that I'd build out the "shell" with infrastructure at the ready for whom ever would want to lease the space to then build out as needed. 

If there were $40k "extra" a month, that'd certainly help the numbers!

You’ll need to compare local lease rates; totally depends on where you are.

NNN is the way to go for sure. TI allowances will be around $50/sf to the tenant if you build a shell space so figure for that. Commercial is very different so consider the loss of efficiency by trying to figure out a very different busyness for only a couple of tenants - it'll absorb quite some time (different laws, different leases, different marketing, etc)

Also you’ll want to consider how you’ll break apart the utilities etc if it’s combined with the residential can be tricky.


Always, always, always do NNN. It's a major advantage to commercial real estate and protects your return and cash flow. Hire a good COMMERCIAL Realtor with a proven track record to secure the type of tenant you want for the building. Trust me, hiring a good COMMERCIAL Realtor will allow you to receive maximum market rents, concede as little as possible, and have a stronger offering.

I'll tell you this, if you can buy a property with two vacant retail stores and Starbucks comes in and takes one of them, the 2nd will rent relatively quickly. Then just sell the property at an insane markup. That cap rate will be well below 5%.

Then call me and I'll pay you handsomely for getting a SBs in one of my retail stores. It's very very difficult unless you're in a major city and there are no vacant lots near you. 

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