Emotional Attachment to a Site

Don’t become emotionally attached to real estate. There is always another property to lease (otherwise, McDonalds would have one location).

I know it’s easier to read those two sentences than to embrace them. Just like everything else in life, including cars and homes, you can only afford what you can afford. Within the PRS website we explained tenant occupancy formulas to help you understand the relationship between rent and sales. Every regional or national chain starts with a sales projection and then backs into an occupancy they can afford. If the numbers work, you do the deal and lease the space. If the numbers don’t work, please pass on the site.

For example: Let’s assume you project a million dollars in first year sales. Let’s assume you can afford an occupancy percentage of 10%. So, you can afford $100,000 for base rent, CAM, Taxes and Insurance in year one. If NNN are $10 psf for the 2000 sq ft space you want to lease, you can afford up to $40 psf in base rent. If you can’t lease the desired space for $40 psf or under, you must pass on the site and keep looking. Your site is out there.

It’s just going to take a little longer to find.

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