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Tenant Rent Formula 
 
retailcriteria.com has an extensive database (of over 180) Tenant Classifications. Please review the following list and find the business or "use" that most closely matches your business venture. This service will assist you in establishing what an acceptable rent structure should be, by comparing what other retailers are paying in occupancy, for your same kind of business. Plus, our Tenant Rent Formula report will show you what kind of sales volumes are being generated for the same kind of business, you are considering.

This example reflects the data retailcriteria.com would provide if you ordered the Tenant Rent Formula report for a Dry Cleaning Business.  We selected this "use" example to illustrate the quality of detail in our analysis and because every community has a dry cleaner.  ALL OF THE STATISTICS ONLY APPLY TO A DRY CLEANING BUSINESS.  Your "use" statistics would be different.

 

 

Neighborhood
Center

Community
Center
Regional
Center
Super Regional
Center
# of Stores in Sample 96 90 None 5
Median Store Size
sq. ft. for this "use"
1500 sq. ft. 1600 sq. ft. N/A 495 sq. ft.
Smallest Store
sq. ft. in Sample
1053 sq. ft. 968 sq. ft. N/A Sample too small
Largest Store
sq. ft. in Sample
2398 sq. ft. 2,645 sq.ft. N/A Sample too small

The value of the store size & center type analysis is:
As you can see from the number of dry-cleaners listed under each type of shopping center, certain "uses" gravitate to a specific type of center to sell their product or service.  The "typical" square footage leased, for a dry cleaning business is noted.  Please consider these variables in the type of shopping center you target and the size of store you are considering, when opening your business.

 

  Neighborhood
Center
Community
Center
Regional
Center
Super Regional
Center
Median Sales
per sq. ft. in Sample
$167.00 $143.00 N/A $259.00
Top 10% in Sales
per sq. ft. Produced
$402.00 $293.00 N/A Sample too small
Top 2% in Sales
per sq. ft. Produced
$621.00 $406.00 N/A Sample too small

The value of the sales analysis above is:
By comparing  the numbers above to your sales projection on a per square foot basis, you will see whether your projection is overly optimistic given the "norm" or median for your business use.

 

  Neighborhood
Center
Community
Center
Regional
Center
Super Regional
Center
Median Base Rent
per sq. ft. Charged
in Sample
$15.36 $16.25 N/A $20.20
Top 10% in Base Rent
per sq. ft. Charged
$35.04 $29.14 N/A Sample too small
Top 2% in Base Rent
per sq. ft. Charged
$61.12 $49.29 N/A Sample too small

The value of the base rent analysis above is:
Every business "use" has profit margins and a maximum rent occupancy structure that they can afford, based on the type of shopping center you become a part of.  Landlord Total Occupancy is made up of two primary components.  (1) Base Rent  (2) Pro-rata Charges which include CAM, Taxes, & Insurance.  For our dry cleaner example, the neighborhood shopping center format attracted the majority of the dry cleaners and they paid a median base rent of $15.36 per square foot when leasing 1500 square feet.  How does your business "use" compare?  NOTE: Public Utility Charges are not included  in analysis.


 

  Neighborhood
Center
Community
Center
Regional
Center
Super Regional
Center
Median, CAM, Taxes, Insurance & Base Rent Total per sq. ft. in Sample $17.94 $20.14 N/A $34.82
Top 10% in CAM, Taxes, Insurance & Base Rent Per sq. ft. Charged $39.75 $35.70 N/A Sample too small
Top 2% in CAM, Taxes, Insurance & Base Rent Per sq. ft. Charged $67.61 $62.76 N/A Sample too small

Pro-rata Charges include CAM, Taxes and Insurance.  For our dry cleaner example, the neighborhood shopping center attracted the majority of the dry cleaners and they paid a median base rent of $15.36 per square foot when leasing 1500 square feet, as noted above.  When adding in the Pro-rata Charges this occupancy expense increased to $17.94 per square foot.  How does your business "use" compare?


 

  Neighborhood
Center
Community
Center
Regional
Center
Super Regional
Center
TOTAL OCCUPANCY AS A PERCENTAGE OF SALES for this "use"        
Median Total Occupancy as a % of Sales 18.52% 17.91% N/A 19.61%
Bottom 10% with Least Expensive Rent in Sample 10.36% 9.75% N/A Sample too small
Top 2% with Most Expensive Rent in Sample 30.39% 28.26% N/A Sample too small

The value of the analysis above is:
When leasing commercial property, YOU SHOULD always base your maximum occupancy budget on your best analysis of a sales projection for your business or "use". Formulate a sales projection using the above information as "norm" and then adjust up or down based on the strength of the location, demographic profile of the customers in the trade area and the quantity of competition you have identified.


 
How should you benefit from the analysis on your selected business "use"?  For a potential dry cleaner:

If you wanted to open a dry cleaning store, and found a 1500 square feet vacancy and agreed on a $20.00 per square foot base rent and $3.00 per square foot in pro-rata charges, your annual Landlord Total Occupancy would be 1500 x $23.00 = $34,500.  With a "norm" or median occupancy of 18.52%, (for a Neighborhood Center) you would have to generate $186,285 in annual sales (after you open) to maintain an occupancy percentage less than the "norm".  ($34,500 divided by .1852 = $186,285).

 

Remember that these ratios are indicators of national averages.
 We hope you have found this example valuable and invite you to order the  Tenant Rent Formula analysis for your business. 

Thank You  retailcriteria.com
 

Data compiled from information study of receipts and expenses in shopping center operation: 
 Dollars & Cents: U.L.I.

   
 

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