Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-212-3423.
I found this interesting – Wal-Mart Realty. This division of Wal-Mart has buildings for sale, land for lease, and in-store leasing on Wal-Mart and Sam’s Club properties. Wal-Mart and Sam’s Club already have the people traffic that many franchisees require.
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I think that is a super idea. You know they’ll have a steady flow of shoppers on their property. I bet it’s not cheap though. I bet it is more expensive than a strip mall.
Ryan, I must thank you for the posting on Quiznos, that has inspired so many interesting and depressing responses.
Since I am a commercial real estate broker specializing in vacant big boxes (i.e. anything over 20,000 sq ft) and Wal-Mart Realty is one of my clients, I thought a response was called for.
Most of the closed Wal-Marts are not right across the street from a relocated (i.e. Super) Wal-Mart and thus not able to parasite from its traffic, and in many cases the retail market of that particular town or city has shifted away from the vacancy.
The consolidation, bancruptcy, or plain failure of many chains has left far too few retailers to take these boxes. W-M is aware of this.
Therefore a party with a decent credit or balance sheet and a business plan can often lease these buildings for bargain basement rates like $2-4 per sq ft.
However, they would have to pay Wal-Mart for common area maintenance anywhere from $.80 to $1.50 per sq ft typically (in most cases this is less than what it would cost the user, because W-M has negotiated better regional rates on snow plow, landscaping etc), plus have to pay the real estate taxes, which are all over the board depending on municipality.
W-M will also pass along their $.10 per sq ft of insurance cost for fire and extended coverage on the structure, which is cheaper than you can get. You still have to cover storefront glass, property and liability within the premises with your own insurance, plus any upfit cost.
You can see that on a 70,000 sq ft building for example, with a $1.50 per sq ft real estate tax, $1.00 psf maintenance, $.10 insurance and “only” $2.00 psf rent , the monthly occupancy cost is $26,833 and that is for a VERY GOOD DEAL – it is the sheer size of the building that becomes daunting in the numbers.
Many for-lease buildings can also be well-purchased, with W-M’s help. That’s another story.
Appended to previous comment:
I was obviously not talking about leasing in-store departments at operating stores – that can be a very good situation!
Also in taking over vacant big boxes, I neglected to mention that you take over all utility cost as well.
thanks
BobbyStar80 wrote on September 15, 2008 @ 12:52 pm:
# 3 BobbyStar80 can I get your contact info as you can help me (as Wal-Mart Realty is one of your clients). I could be reached at franchise_seeker@hotmail.com
TIA