Dollar Store Lease Agreement

[Micah T Uptegrove]

I am currently negotiating a lease for a build to suit family dollar store. They had approached me about building on one of my lots. They had originally wanted to purchase the land, but when I refused, they wanted to negotiate me building a building for them. Their initial proposal is for me to build them a 10,500 sq ft building. 

They want rent to be $9 a sq ft for 10 years. After that they could renew in increments of 5 years in exchange for rent increases of $.50 a sq ft. So that is not enough to cover inflation and there would be ten years without a rent increase. 

They would reimburse me for real estate taxes and property insurance with caps of $.74 per sq ft and $.25 per sq ft respectively. The amounts they want to pay are low, but taxes and insurance should also be low. They want me to be in charge of maintaining the parking lot, the structure, and exterior. They would be responsible for interior maintenance including the HVAC. I would be in charge of handling lawn-care and landscaping, but they are fine if I can set it up where this is minimal or nonexistent. 

I found a website saying the average rent for a family dollar store was $13 a sq ft. I have also read that they will try to hold you hostage for lease extensions by demanding you accept less in rent if you want the extension. So I am looking for feedback on what can be expected with a commercial lease like this. I have residential properties, but this would be my first commercial lease. 

Background info: 
There is a competing dollar general store in town too. Dollar general is on one side of the interpass from the highway and mine is on the other. The dollar general store is slightly closer to the highway, but my lot is located between 90% of the town and the highway. So 90% of the town would have to drive past my lot in order to get to the competing store. The town is a smaller rural town with a population of around 4,000 plus another 10,000 within 5 miles that has to drive past the lot in order to get to the highway. The only other option they have is a couple acre lot for $750,000 by the dollar general. That lot would put them in a worse position than dollar general. 

[Sean T.]

@Micah T Uptegrove

Hey, I cannot speak to your specific location BUT you can easily get info on this via Loopnet.  Look in your county for "dollar" stores, freestanding, and the associated details such as $/sf will be listed.  I just pulled a quick look and there is a family dollar 30mins away from me for sale with pricing at $20/SF for sale.

Commercial is data heavy if you know where to look.

Good luck!