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Rent to Sales Ratio

Posted by capital on February 20, 2018
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The base rent to sales ratio is a great way to quickly determine if a site makes economic sense to lease.  The base rent to sales ratio will vary from 3 to 20% depending on the type of business. Forecast your sales for each location under consideration to benchmark.  Fort many retailers, base rent should be no more than 5% to 10% of annual gross sales.  To calculate the base rent to sales ratio divide the annual base rent by the forecasted sales. If you forecast $875,000 in sales for your quick serve restaurant and the base rent is  $10,000 per month, the base rent to sales ratio is 13.7%. This would be considered an expensive site to lease since additional occupancy costs still need to be factored such as CAM, insurance, and real estate taxes.  Some retailers especially those in a mall will also add a portion of their advertising into occupancy costs.