Light Up Dark Stores


Are you diving into those brokerage and subscription websites that report sales and listings of leased retail boxes? If so, you’ve found that rents and lease terms are stated in a combination of current and original listings for sale, revealing much.

The range of Overall Capitalization Rates (OARs) for these net leased boxes are primarily based on tenant credit rating, but also on lease terms and building age. The spread between a leased fee and fee simple scenario can be gleaned by looking at the OAR range, which depends on:

Tenant credit rating National Drugstore with good credit = low OAR
Struggling Big Discounter with not as good credit = higher OAR
Building age & lease
term remaining at sale
OARs for new National Drugstore can be 1% to 2% lower than pre-2000 stores
Is it a ground lease only? OARs for these can be lower (see post: Hold Up! Bank Branch Leases)

Compare numerous freestanding retail transactions regionally to enhance the sample. If you observe a total spread of about 3%, with most data pointing to between 1% and 2%, rather than get caught up in the nuances of rate components, keep it simple. Strike a reasonable balance to arrive at an adjustment for credit tenants to reflect fee simple interest.


Also, appeal efforts for dark stores often allege branding interest in rental rates due to specialty construction. This can easily be overstated, but you can give it some recognition with a small rent reduction.

Bottom line, the data collected can offer credible net rents and OARs; both can be adjusted to remove branding and leased fee interest. These data can also be used to adjust sales of leased fee properties, simply by OAR differential.

The result? An assessment reflective of fee simple value based on actual leases and sales and listings of truly comparable properties viable enough in location and condition to be leasable… way more fair than being limited to sales and listings in your market that are vacant.