I have a client with a free standing 2000sqft building Starbucks is interested in leasing. They want some numbers from us on asking rent based on their BTS standards. I was sort of blown away when our contractor, who only does freestanding restaurants came back with $700k of TI/build out. Contractor said ground up is around $1mil even if only 2000sqft.
Does that sound right? I know we have many other things to consider like all the electrical, menus, parking lot, etc. But jeez...that's expensive.
There is a comp a few miles away for sale. 1600sqft new construction Starbucks with an NOI of $150k. That's $8ft, lol.
What's $8 PSF? That rent is $83 PSF
West Coast is monthly, not annual rent.
Are you're saying $83PSF is low? The more eye opening number is s construction budget of $350 PSF. But perhaps the current building doesn't have venting, restaurant kitchen, HVAC, proper plumbing, ADA compliance and is essentially a build to suit within 4 wooden walls. Construction include roof too?
83 is high in general but in my experience with NNN deals you can't look at lease rate per foot or sales price per foot. Every time I do my head pops. I did a comp survey of SoCal NNN deals, Average was $800 per square foot sale price.
There is some new HVAC but for food service prob not enough. It's just a shell now in a great location and a drive through.
I don't think 750k is that far out of the realm. I seem to remember reading that the average cafe costs around that to open (which makes sense considering they produce around $1 million in income a year).
As far as other restaurant comps are concerned:
I'm looking at a restaurant deal up in Boston that we are budgeting $200 PSF in landlord work to get the space ready plus an additional $200 PSF in TI.
And I know of a Manhattan restaurant that just dropped around $300 PSF in landlord work to run refrigeration, electrical, venting, etc. before spending an additional $450 PSF for their new place.
Given, both of these places are a bit more high end than a Starbucks, but restaurant builds are just plain expensive.
That makes sense, given that $300/sq ft is about what I generally get charged for a meal in Manhattan... and I'm not even 6 ft tall
$700K on 2,000 SF or $350 PSF for just TI work, or base building also? Depends on the condition of the space (warm lit/cold dark shell), but if there are some capex dollars required plus Starbucks wants a soup to nuts build-out without coming out of pocket at all on TI, not insane. Also does not help that it is such a small store--no economies of scale on more expensive materials/FF&E.
Pretty unreliable to comp off East Coast IMO...recently moved from there to West Coast and the relative increases in construction prices blew my mind. Union labor, skilled worker shortage, timber hyperinflation and other factors are all driving numbers way higher than expected if you aren't checking in every couple of months (ie, 6%+ y-o-y)
Just for TI.
Yeah I mean even if their basis was already $1.5 M, which I doubt it is, that's a 6.8% return assuming the NOI works out about the same. Not too shabby given what I've been seeing on the west coast with respect to retail. Not as familiar with free-standing/strip retail but the grocery anchored stuff I've seen that's worth owning is trading for 5.5% at best and sniffing low 4's for the really choice shit.
Yeah - seen some new starbucks in socal go in the mid- to high 3s...
Without knowing the scope, costs seem to be within reason.
Last year there were some SoCal Starucks deals trading in the high 3 cap range. The few San Diego listings at 3.75 cap have been for sale for some time now. There needs to be a 4 on it to sell now I believe.
Yeah this seems reasonable/in-line with what I've seen.
I've done a couple Starbucks shells, and many Dunkin full builds. I'd be shocked if its much more than 500k for a build out. 1 mill. is prob about right for a ground up build. Site work can vary a lot. FYI, 2000 sq. ft. is a really big Starbucks
The most recent Starbucks build a few miles from this site is 1650sqft. I'd love to have this one be that big or a max of 1850sqft. This would allow us to have a second unit available for lease. Because of the large traffic counts (27k AADT) there is talk of up to 2250sqft. At that point we would not have the ability for a second unit. The city would probably require us to demo a part of the building to add more parking.
We shall see. We're pretty early on here. Would love to have it only cost 500k.
Its been a while but did you ever do this project or another Starbucks? Im eyeing a pad for purchase.
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