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Build out costs - revisited

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rjg123

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Hi All,

I reviewed all the articles in FAQ and didn’t find what I was looking for, so I ask for your thoughts.

Not counting equipment, what would you estimate the build-out costs of 1500-1800 sq ft of vanilla shell / white box?

This would be for a 35-40 seat sit down pizza restaurant looking to capture some of the feel of the original places in Naples, Italy, so it wouldn’t be extravagant.

I’ve seen estimates of $85 - $135 / sq ft, but that seems high or it includes equipment? Your thoughts?

Thanks!
 
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Those numbers do not seem crazy high to me and would not include equipment. A lot is going to depend on your mechanical requirements and what already exists in the building. Are you adding hoods? Upgrading electrical? Installing a grease trap? Adding or upgrading HVAC? If you are doing any of those things the dollars can add up fast. Not counting those things, $30-$50 per foot is very common from “vanilla” finish. (Not that there is any standard of what a vanilla finish includes) Does your vanilla finish include walls? If it does are they suitable for restaurant kitchen use? Is plumbing and electrical brought to the wall or distributed inside the unit? Does “vanilla” include lighting? Is that just standard office grade acoustical tile and florescent? What about floors? I have seen “vanilla” leave the concrete bare. In other cases it includes some basic covering. Getting from $40 per foot (80K in 2000 square feet) to $100 per foot would be another 120K and those mechanical costs could get you there easily.

I would add that I would expect a landlord to pick up most if not all of the mechanical side and also contribute to the other improvements. I sure hope you are getting some money from them!! For example, a landlord might pay for the grease trap, HVAC and electrical upgrades and kick in $20 or $30 or $40 per square foot toward other improvements depending on the local leasing market and the lease being signed. If you are in a very tight market this might not be the case but most places it is. If they don’t pay for them I would expect the lease rate to be WELL below local rates for space that has these upgrades in place.

Because of the costs of the mechanical side of restaurant build-out it is often a much better idea to remodel existing restaurant space where the upgrades already exist.

(In addition to designing, building out and owning three businesses, I was the national leasing representative for Patagonia clothing company and am currently licensed as a broker in Colorado so I am very familiar with leasing issues and build-out variables.)
 
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Thanks for the quick reply!

So you’re saying these items should be covered by landlord?
  • Hood and venting
  • Grease trap
  • Others: Flooring, bathroom to code, HVAC upgrades (if needed), ceiling improvement (if needed)
So tenant improvements, equipment, other start-up costs & estimates would then be:
  • Walls ($5K)
  • Equipment, small wares ($42K)
  • Seating & Tables ($5K)
  • Decor ($1K)
  • Signage ($2K)
  • Permits ($2K)
  • Architect (???)
  • Cash drawer ($.5K)
  • Initial Labor ($2K)
  • Utility deposits ($2K)
Please feel free to edit at will and thank you for your help!
 
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There is no “should” just as there is no “standard” in leasing. What I am saying is that this is often the case. How long has the space been vacant? How many people are looking for space? How does the rental rate compare to other options? The kinds of upgrades we are talking about stay behind when you leave. Before I leased a space where I had to pay for those things I would be looking for either space that already has them or a landlord that will pay for them.

Never forget that there are a lot of “money buckets” in a lease. People focus on the base rent and forget the other places where there is either value or expense. Rent increases? Flat, Inflation based? So called “market” (defined how? and what happens if you disagree?) How about a rent holiday? I would not expect to pay rent during construction but most landlords will not give that away unless you ask for it and most attorneys have no idea. (This is why there is place in the world for commercial tenant rep brokers) If your landlord will not give you everything you want/need in TI money, look for other ways to get it like no or low rent rent for some period of time, no rent increases for five years, marketing allowance? If he does not want to pay for build-out and does not have a broker or YOU do not have a broker tell them you want 3% of the total lease value (base rent X entire lease 2000 square feet X $20 per foot X 5 years = 200,000 so that would be $6000) in cash toward build out from the commissions they are saving. Sometimes a LL will give you a good deal, but generally only if you ask! Sometimes you have to get what you need in lots of little pieces.

Of course all this is moot if you are in a hot market with a waiting list for space. But is not the case in very many markets. For example, the most recent business I opened I negotiated the lease in 2007 when the market was pretty hot here. I still got the LL to pay for all HVAC (including maintenance and replacement), lighting allowance of $10 per foot, all utilities to the box inside the space, and no rent for 8 months after they turned over the space to me with all permits in place for my work. On top of that I got $40 per square foot allowance for my improvements. On the other hand, we are in a very prime location and pay high rent.
 
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Hi RJG;

We have equipped several thousand pizza shops all over the nation.

Most land lords are not going to pay for hoods and ventilating systems, grease traps etc. the usually have an a/c unit installed that is good enough to cool at building but not large enough to compensate for the heat generated by the equipment. The renter has to pay for additional cooling.

Perhaps if a national chain was willing to sign a long term lease a landlord would supply the above items.

George Mills
 
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I’m getting ready to start construction. 1743 square feet hood and grease trap already in but may need to add more capacity to grease trap but definitely adding more hvac ten tons total for the space. I’m at about 52/ft including budget for change orders. Space has plenty of electricity. Landlord is giving 32/ft for improvements but center needs rehab and less than 60% occupancy. However great location and lowest rent in area. 17 bucks a square foot including cam and taxes.
 
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Hi Gents,

Very helpful answers!
With all these considered, I’d estimate needing $300K to build out and survive the first year.
Does that sound about right based on your experience?

Thanks!
 
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The devil is in the details my man. If you pRovide better information you’ll get better advice.
 
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We just signed a lease for a new location on May 1st. Its a closed down sub shop so it does have some existing build out that we are going to use. I will update this thread as my expenses come in. So far I’ve shelled out 15K for design, engineering and permit fees. This location is 1400 square feet. A delco with a few seats, (about 20)

David
 
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Thank you much, David! I appreciate it and look forward to your updates!

RG - I know the details can swing the number wildly, that’s why I tried to describe the concept and the estimates I’ve gathered so far.
The problem comes with being a newb - I have no basis for my numbers other than research, which is based on a wide range of locations, concepts, markets, experience, etc.

In my mind, I keep asking: with $120K of my own funds + maybe $40K-$80K of angel investments, am I just in a pipe dream to consider a 40-50 seat Neapolitan restaurant?
That’s the, um. million dollar question! 🙂
 
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Plans are still in Plan check but I did get a couple of plumbing estimates:

1500 Gallon grease interceptor. 12K to start, could run up to 15k with permits and water district connection fees
Basic floor dig up plumbing 15k basically to dig up the cement, lay the pipe and fill it back up. That does not include any of the sinks since I’m doing that myself.

Should be able to get both of these done for 30k range. I’m pretty happy with that. I budgeted 35k low end and 50K high end.

So far I’m ahead.
 
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Finally got city approval and we are ready to begin build out. Here are our construction prices:

Plumbing:
Mainly trenching and grease interceptor installation 39K
Hood system, fire suppression and additional ac unit 41K
Flooring 10K
Electrical 7k
Cabinetry, walls and misc 14k
Signage 5k
 
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Yea no kidding. Could you elaborate a little more on these costs?

They make no sense to me at all
 
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The plumbing cost for the most part revolves around the grease interceptor. We have to drop a 1500 gallon (total overkill) unit out in the parking lot in front of the store. The under ground plumbing currently runs to the side of location so we have to re trench all of the under ground plumbing to the front. The grease interceptor is 15K. The trenching is 15K, and all the other misc plumbing is 9K. On top of that we’re going to have some water connection fees.

The additional ac we’re putting in is 12K and the hood and fire suppression is 29K. I went with a Captive Aire hood system which cost plenty extra up front but it should pay for itself over the years with the lower CFM it pulls out. The first bid I had on the ventilation package was 49K, but my general contractor shopped the job around for a got it for the 41K.

Both of these were over my budget. I was thinking 30K for each one.
 
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Hi RJG;

We have equipped several thousand pizza shops all over the nation.

Most land lords are not going to pay for hoods and ventilating systems, grease traps etc. the usually have an a/c unit installed that is good enough to cool at building but not large enough to compensate for the heat generated by the equipment. The renter has to pay for additional cooling.

Perhaps if a national chain was willing to sign a long term lease a landlord would supply the above items.

George Mills
Click to expand...
Hi George,

Quick question: If I’m using a Middleby Marshall PS-360 pizza oven, what size of type 1 hood would I need? I ask because the cooking chamber of the oven is only 55" but when you add the conveyors extensions on each side it’s 90". I believe the hood must hang at least 6 inches over the oven on all sides. Just want to know if I need it covering only the cooking chamber or if it’s for the whole oven? Thanks in advance!
 
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Hi Joe:

We use a 9 foot hood on a PS 360 so that the blowout from the ends of the oven does not force air out beyond the hood. Better to be safe and pass a smoke bomb test rather than run the risk of failure and having to do the job over.
 
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