#BeyondYourSpaceNeeds Episode 19: What’s Your Target Rent to Sales Ratio When Leasing Commercial Real Estate?

Using base rent to sales ratio can be a tool to determine if a site makes economic sense to lease.  The base rent to sales ratio will vary from 2 to 20% depending on the business type.

For many businesses, base rent should be no more than 10% of annual gross sales so that you leave significant funds to cover labor, marketing, and other expenditures.  For instance, if you forecast $500,000 in gross sales, your base rent should be no more than $50,000 for the year or around $4,166.67 monthly.

In retail and NNN lease settings, be sure to consider CAM, insurance, and real estate taxes as if your base rent to sales ratio is already above 10% than it’s an expensive site to lease.

In sum, this is a rule of thumb and each individual case may have different considerations.