Your "good deal" is not necessarily my "good deal" 🤝

Our society is so polarized that we can disagree on some of the most fundamental topics, like whether The Righteous Gemstones is a genius work of art (it is), or whether life is worth living without cheese (it is not).

Still, there are a few baseline things we can all agree on:

No one wants to be taken advantage of

Everyone likes a good deal

In retail real estate, your best safeguard against #1 is to use a reputable retail real estate broker. But #2 is tricky, because when it comes to brick-and-mortar business, your “good deal” is almost certainly not my “good deal”.

Your broker’s job is to ensure that the deal you’re considering is within the realm of normal for your market and for a tenant like you, but once you’ve crossed the threshold of “market appropriateness,” the rest is relative.

Consider this — let’s pretend that Abby and I are both opening businesses in the same shopping center. In fact, we’re looking at adjacent spaces of the exact same size.

Abby is opening a dog yoga studio. Her buildout requires no special plumbing or electrical requirements, and as a “fitness” operation, she needs to keep her target occupancy costs (rent as a % of sales) no higher than 30%. Abby’s average sale is $45, and her target market is narrow. Abby wants to run this one location for the long term.

Now I, just next door, am opening a mac-and-cheese cafe. That’s all we sell. Since I’m a foodservice operation, my buildout does require specific electrical, plumbing, and ventilation, and I need to keep my occupancy costs no higher than 10%…ideally less. My average sale is $12, and my target market is massive, since everyone loves mac-and-cheese, duh. I plan to expand my empire and take over the world.

Abby's "good deal" may look like this:

Rent: $40/SF NNN
TI: None
Term: 5 years + 2 3-year renewal options
Rental Abatement (Free Rent): 6 months
2 hour free customer parking
Exclusive Use: boutique fitness, dog services

Whereas my "good deal" may look like this:

Rent: $35/SF NNN
TI: $60/SF
Term: 10 Years + 2 5-year options
No rental abatement, customer parking validation or exclusive use

So is Abby going to try to fight the landlord in the parking lot if she learns that she’s paying a higher per-square-foot rent than I am? Or if she learns that I got a bigger TI package? No. And that’s not because Abby is above fighting people in parking lots - it's because she knows a $40/SF NNN rent is affordable given her profit margins, but that a competing yoga studio next door would be the kiss of death for her business.

Am I going to wage an internet smear campaign against the landlord if I learn that I didn't get the parking validation Abby's customers are getting? Nope...even though the mighty keyboard is my favorite weapon. Instead, I know that $$ towards my pricey buildout is critical, and enough term on the lease to be able to execute my long term vision for the company is key. Plus, I know that my customers and Abby's can share the parking lot since her class times don't overlap with my rush, AND that my customers will happily pay to park because, like I said, mac-and-cheese.

While there are some differences of opinion that are simply irreconcilable - cheese-agnostics, I will never understand you - when it comes to what constitutes a good deal, we can actually all be right.