Rent Question - Maybe I'm not crazy

[pjcampbell]

itzapizza, where in Northern NJ ?

I am in Bergen County here. I don’t have a pizzeria and have most likely changed plans about opening one but have been inquiring about space around for another project.

1600 for $6000 sounds like for a high end town, like Englewood or Ridgewood or something.

 

[Tony397]

Rent is a giant waste of money. We rented for many years and we finally had the opportunity to form a partnership and buy the 6 store strip we are in with the rest of the tennants. Now 15 years later it is paid for. With real estate the way it is, is there a way you can find a store to purchase. As time goes on your land lord is going to hammer you for a lot of stuff you don’t deserve and if he feels he has you where he wants you because you are succesful and moving is out of the question he we stick it to you. Just becareful of the lease and make sure he isn’t making you pay for upkeep and misc. stuff like landscape maintenance, plowing , and repairs. My sister got suckered into a lease like that and she is dying trying to pay the rent every month

Good Luck,

Tony

 

[bodegahwy]

“make sure he isn’t making you pay for upkeep and misc. stuff like landscape maintenance, plowing , and repairs”

This comment is mistaken. There are different ways to structure a lease. In a triple net lease, the base rent is lower and you pay these items (as well as prorata property taxes and building insurance) based on actual expense. In a gross lease the items are included, but the rent is higher. When comparing one lease to another, you have to roll in all these costs regardless of how they are included. (They are ALWAYS paid by the tenant, one way or another). Apples to apples.

Upkeep, landscaping, plowing etc are all standard and legitimate items in a lease. In a multi-tenant building, you save money by having these items handled by the landlord rather than contracting them yourself. Somebody has to plow the snow, clean up the area and take care of the landscaping. Yes, you need to be sure that the fees are reasonable for the service provided and that the landlord does not add unreasonable management fees to the common area expenses.

I do own a pizza store (over ten years now) but what I do professionaly is commercial property, business brokerage and leasing. I am a licensed broker. Most of my leasing work is tenant rep (means I help businesses find locations and negotiate leases) and I am very familiar with these issues.

 

[bodegahwy]

28K PER MONTH?!!

You would have to believe that you were going to do about 4 Million a year for that to make sense. Are there businesses that do that out of 5400 square feet? Absolutely. But they are not common and depend on great operations, great marketing combined with a location that can provide traffic and has the parking you need to do the volume. At 5400 feet I assume you are looking at sit-down. 4M per year is an average of 11K per day which means you have to do about $15K-20K on your big days. How many seats is that at what average ticket? Will that many people come in your door? The math would be tough for pizza because the average ticket math means you are looking at maybe 3 turns of the tables in a location that size.

Lease rates vary in most markets. I have worked on leases in New York City, Boston, DC, Atlanta, Portland, Seattle, Honolulu, Haleiwa, Maui, San Diego, Santa Monica, Buffalo, Philly, Miami, Ft Lauderdale, Annapolis and other places I am forgetting right now in addition to my home state of Colorado.

The rent on a side street may be 30% less than a location on the main street less than a block away. Never mind the difference between really top flight locations and truly poor ones. In my own town, lease rates range from $8 to $40 per foot. I worked on leases as high as $125 per foot (6000 square feet, $72,000 per month, Manhattan. NOT pizza.). The comments above about the rent and the relation to sales are right on the money. If you can do the sales, the rent does not matter.

What is the right rent where you are looking? I could not say without being there, but a good local tenant rep broker can help you. They can help with what is available, what the true market value of the property is and help you avoid pitfalls in the lease which are all too common.