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Commercial Leases - Average Percentage Rents Charged in Commercial Leases

It Pays to Negotiate Before You Sign

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Filed in: Leasing Commercial Office, Retail and Industrial Spaces

What is a Percentage Lease?

A Percentage Lease is a lease that typically requires a tenant pay "Base Rent" and then on top of that amount pay a percentage based on monthly sales volumes. Percentage leases are commonly executed in retail mall outlets but depending upon the location and nature of your business can have a dramatic impact on percentage rent.

Never sign any lease offered to you without first trying to negotiate better terms. And because percentage leases are complex, and could cost you a lot of money down the road, it pays to have an attorney review any percentage lease before you sign one.

Percentage leases should not take a percentage of all sales made, but should include a percentage paid to the landlord (lessor) only when a tenant has made a certain amount in any given month. For example, a percentage lease might require a tenant to pay 5% of all sales that exceed more than $25,000 in any given month.

The following table details information for some business types and the average percentage rent charged in percentage leases.

Typical Percentage Rents in a Neighborhood Shopping Center

Typical Percentage Rents
Alcoholic Beverage Stores1.5-5.0%
Card & Gift Shops3.0-6.0%
Card & Gift Shops5.0-8.0%
Drugstores 2.5-4.0%
Jewelry Store7.0% or More
Pet Stores 5.0-8.0%
Restaurants 4.0-7.0%
Grocery Stores 1.0-2.0%

Source:

Table Adapted from Answers.com. Real Estate Dictionary: Percentage Rent. Access Date: July 06, 2008.

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