I am looking at a small shopping center that I may want to buy. How do shopping center leases work?

In Buying Property - Asked by Justin H. - Mar 4, 2010
Report Abuse
Answer this Question

Answer(s)

Gregory G.
Broker/Agent
San Francisco, CA

Quite commonly, the tenant pays a base rent – often tied to the amount of square feet the store occupies. In addition, the lease may require the tenant to pay a certain percentage of gross sales.
Shopping tenants often contribute a portion of the expenses of maintaining the common areas of the shopping center and may also pay for part of the property taxes.
Gregory Garver - Commercial Real Estate Broker
Broker License# 01716531
(415)225-9894
gregory.garver@gmail.com

Mar 5, 2010
Report Abuse
Chris R.
Broker/Agent
Phoenix, AZ

I office with a management company that manages somewhere around 100 "C" Class strip centers in Phoenix, AZ. To answer your questions, it really depends on the Class of the Asset. Is it an "A" level, "B" level, or "C" level. Age, location, amount of deferred maintenance, and current tenants in place all go into what eventually makes up the Class of the center,which ultimately dictates the rate and structure. Does it have a large Anchor Tenant? Does it have a large parking area, or is it off the street? What percentage of the property could be considered "common area?" Answer all of these questions, and you will better be able to figure out the most appropriate structure. If you have a large Anchor Tenant for example that uses the majority of the property, you could negotiate into their lease, that they pay a larger portion of the CAMs which could be marketed to potential smaller tenants as an overall costs savings. As for the structure of the lease, it's about as standard as you can get.
James Appleton
The Rudel Company, Inc.
Phoenix, AZ
602-266-5662
james@rudelcompany.com

Mar 5, 2010
Report Abuse
Chris R.
Broker/Agent
Denton, TX

Will vary from region to region - and - importantly - size of the property as well as condition. We manage several small strip shopping centers. Some have straight leases - ie: no terms or ability to recover any variables - increases in taxes, maintenance or insurance. Some use NNN leases - a lease that DOES allow for recovery from tenants for thei pro-rata share of taxes, maintenance and insurance. I'd suggest you confer with an experienced commercial REALTOR to assist and explain the variances and to provide you with an analysis of of the leases and the overall income and expense of the operations of the property - all relative to the purchase price and the return on your investment. Important to review the terms and conditions of the leases to know the impact of obligations in the future - of both parties. Chris Rosprim, Scott Brown Commercial, Denton, TX

Mar 6, 2010
Report Abuse

Welcome to Answers

LoopNet Answers is where the commercial real estate community shares what they know to help each other out. And it's all for free.

Ask a question to get advice from brokers, investors, professionals and local experts.

Answer questions to raise your visibility as a trusted advisor and build new relationships.

Ask a Question

Post Question