New lease cost

[PL_Pizza]

Hello,
We are looking at a new constructed vanilla box. It’s a 1200 sq ft. space. They only want to give us $8 per sq for improvements and 120 days before the lease and rent commence. We may have to install an in ground grease trap. We wanted to do under the sink traps, but that might not be an option. Dose $8 seem low. I understand that every market and situation is different, but I wanted to throw this out there. Also the base rate, they only came down $1.

Thanks

 

[Piper]

Even for a vanilla shell, $8.00 seems low.

I just signed a lease for a new location. Tenant Allowance is $25.00/sf and the landlord is installing the grease trap at their own cost.

Like you said, it all depends on the market and the type of development. But $8.00/sf seems low under any circumstance. $9,600 isn’t going to get you very far even if you’re just doing a DELCO.

 

[Charles]

We are being offered a lease for $24 a sf and $20 build out. We hope to get a tad better but that is what the market is paying at our location.

 

[paul7979]

I’m looking at 1450 feet in a brand new building, just dirt floor and block walls. Asking price is $18.50/ft plus $4/ft cam with a $30/ft buildout allowance. I’m hoping to get $1/ft off rent and a bit more in buildout, possibly bringing it to a “vanilla shell”.

 

[pizzapirate]

Its obviously not much for TI’s but some landlords won’t offer TI’s at all. The only real way to really know if you are getting a good deal or not is to inquire of the neighboring businesses. How strong a tenant you are influences these numbers as well.

 

[PL_Pizza]

Reading some of the numbers, $8 does seem low. Does the 120 days seem about right? Thanks again.

 

[Piper]

PL Pizza:

Reading some of the numbers, $8 does seem low. Does the 120 days seem about right? Thanks again.

120 days is pretty standard. It never hurts to ask for more because you may get it, but 120 is about right. You can always commence the lease earlier by opening, but it’s nice to have a cushion in case you have any unforeseen problems.

Make sure that you have “outs” on the commencement date in the event of a failure by the landlord. When we did our first store, the strip center that we’re in was brand new. The landlord failed to get the Occupancy permit for the center and it was impossible for us to open. The center received occupancy at around the 145 day of our lease signing.

Without it being spelled out in the lease we would have technically had to pay them rent despite not being able to legally open due to their mistake.

 

[Charles]

We are about to sign a lease. The owner wants to allow 120 from signing. Our city usually takes 30 days (sometimes longer) to issue permits. Is it within the realm of custom to say we will agree to 90 days after permits are issued?

 

[Piper]

Dewar's Pizza Bakery:

We are about to sign a lease. The owner wants to allow 120 from signing. Our city usually takes 30 days (sometimes longer) to issue permits. Is it within the realm of custom to say we will agree to 90 days after permits are issued?

I just e-mailed a commercial broker to ask that question, but I’ve never seen it as either a lessee or lessor.

It could also come back to bite you if the city turns around your permit in a few days. Are you sure your city is still running 30 days? Permits across the country are much easier to come by with residential homebuilding on hold.

It took 45 days to get the permits for my house in August of 2006. A friend of mine building a home in the same city recently got his permits in 7 days.

 

[Charles]

Piper:

Dewar's Pizza Bakery:

Is it within the realm of custom to say we will agree to 90 days after permits are issued?

It could also come back to bite you if the city turns around your permit in a few days. Are you sure your city is still running 30 days? Permits across the country are much easier to come by with residential homebuilding on hold.

No, we are ready to go. All equipment purchased, employees picked out, etc. The sooner the better!

 

[bodegahwy]

Here is the text from a recent lease I negotiated:

The first to occur of (a) the date on which Tenant opens the Premises for business, or (b) the later to occur of (1) October 1, 2008, (2) the date which is 120 days after Landlord’s approval of Tenant’s plans for Tenant’s work (3) the date which is 60 days after Landlord delivers premises with Landlord’s work completed, or (4) the date which is 30 days after the Premises receives it’s final certificate of occupancy.

Landlord estimates it will deliver space for Tenant Finish on August 1, 2008. If Tenant is unable to open for business on or before October 1, 2008 due to Landlord’s failure to deliver the premises for Tenant’s work on or before August 1, 2008 or to meet any of the other deadlines referenced above, Tenant shall receive one weeks free rent for each week or partial week of delay. Free rent shall be credited to the Tenant and prorated over the first year of the lease.

The goal in lease comencment when there is work to be done is to eliminate the risk that your rent clock starts before you get open. Where there are factors that you can not control, you want to transfer the risk for those factors to the landlord.

Every deal is different and depends on local market conditions and the general balance of leverage between the tenant and the landlord. There is no “standard” when it comes to allowances, rent holidays or base rent.

Two pieces of advice: don’t get locked into a concept of some standard in one area of the lease you are unhappy with when you may be getting a good deal elsewhere in the deal that offesets the problem. Second, don’t pass up a good deal over a small amount of money. With 1200 feet in the lease a difference of $5 or $10 per foot in allownace is NOT a big deal if the rest of the deal is good.

 

[bodegahwy]

Also… get clarity on things like HVAC, fire suppression, floors and walls etc before you worry about the allowance. THERE IS NO SUCH THING AS A VANILLA FINISH. It is a meaningless term. You need to DEFINE each and every aspect of the work to be done and clarify WHO is doing it and WHO is paying for it.