Restaurants pay 1.32x the median retail PSF rate in 2026 due to grease-trap, hood, and gas-line premiums per CBRE Restaurant Trends 2026. National median restaurant rent runs $35 to $45/SF NNN, with QSR drive-thru pads at $40 to $80/SF, fast casual in-line at $30 to $60/SF, and full-service in destination locations at $40 to $200/SF.
TL;DR
Restaurant rent prices on three drivers: location traffic count, kitchen infrastructure (grease trap, hood, gas line, ventilation), and percentage rent on sales over breakpoint. Plan for $80 to $180/SF TI allowance from landlord and $100 to $300/SF out of pocket above that for full kitchen buildout. The natural breakpoint formula sets percentage rent at base rent / percentage rate; budget your sales projection conservatively.
Restaurant rent by concept (Q1 2026)
| Concept | Typical $/SF/yr NNN | Key drivers |
|---|---|---|
| QSR drive-thru pad (national chain) | $40 to $80 | Traffic count, signalized intersection |
| Fast casual in-line shopping center | $30 to $60 | Co-tenants, parking, drive-by visibility |
| Full-service casual dining | $30 to $50 | Mid-volume daypart cycle |
| Fine dining (urban core) | $50 to $200 | Trophy locations, brand-driven |
| Coffee shop / café | $40 to $90 | High-traffic + walk-by demand |
| Pizzeria / takeout | $25 to $50 | Modest infrastructure |
| Brewpub / brewery | $25 to $45 | Larger footprint, lower PSF |
National averages per CBRE Restaurant Trends 2026 and JLL Retail Outlook. Specific metros (Manhattan, SF, Boston, Miami) command material premiums above these ranges.
Why restaurants pay 1.32x retail rent
Three structural reasons:
- Higher utility load: kitchens consume 4 to 6x the electricity and water of comparable retail. Landlord underwrites elevated utility cost in CAM/NNN.
- Grease, odor, and pest pressure: restaurants generate higher maintenance burden on common areas. Mall and shopping center landlords charge use-clause premiums to compensate.
- Risk-adjusted underwriting: restaurant failure rate is higher than non-restaurant retail (~30% close in first year per restaurant industry data). Landlords price in elevated risk via higher rent and security deposits.
The 1.32x ratio is documented in CBRE Restaurant Trends 2026 across major US metros.
Restaurant percentage rent
Standard structures:
- Quick-service restaurant (QSR): base rent at 6 to 8% of projected gross sales. Overage at 5 to 7% above breakpoint.
- Fast casual: base rent at 6 to 8% of sales. Overage at 5 to 6%.
- Full-service casual: base rent at 5 to 7%. Overage at 4 to 6%.
- Fine dining: more variable; often percentage-only on high-rent trophy locations.
The natural breakpoint formula:
Natural breakpoint = annual base rent / percentage rate
For a restaurant with $84,000 annual base rent at 6% percentage rate, breakpoint = $1.4M annual sales. The restaurant pays percentage rent only on sales above $1.4M.
Always negotiate natural breakpoint, not artificial. Artificial breakpoints set below natural are stealth rent increases.
Restaurant TI allowance and buildout costs
Per Bhumi Calculator restaurant buildout 2026:
| Buildout type | TI allowance ($/SF) | Total buildout cost ($/SF) | Out of pocket |
|---|---|---|---|
| Second-gen restaurant (refresh) | $50 to $100 | $100 to $200 | $50 to $100 |
| Second-gen retail to restaurant conversion | $80 to $150 | $200 to $350 | $120 to $200 |
| First-gen white-box to restaurant | $100 to $200 | $300 to $500 | $200 to $300 |
| Full-service restaurant fine dining | $120 to $250 | $400 to $700 | $280 to $450 |
Major buildout cost categories beyond standard retail:
- Grease trap: $15K to $40K (interior or exterior)
- Commercial hood + ventilation: $25K to $80K
- Gas line installation: $10K to $50K (depending on existing infrastructure)
- Walk-in cooler / freezer: $20K to $60K
- Three-compartment sink + plumbing: $5K to $15K
- Kitchen equipment (FF&E, not in TI): $80K to $300K depending on concept
How to evaluate a restaurant location
Five questions before LOI:
- What’s the traffic count? Get the city/state DOT traffic count for the road. QSR pads need 25,000+ AADT (annual average daily traffic); fine dining can work at lower counts if destination-driven.
- What’s the existing kitchen infrastructure? Second-gen restaurant space saves $100K+ in buildout if grease trap, hood, and gas line are already in place.
- What’s the parking ratio? Typical restaurant requires 1 space per 100 SF of dining area. Below that, the location may not work.
- What’s the use clause flexibility? Tight definitions (“Italian restaurant only”) constrain pivots. Push for “any restaurant use” or “any food service use”.
- What are comparable restaurant rents in the same submarket? If your proposed rent is 20%+ above comparable comps, you’re overpaying or the location has a specific draw the landlord is monetizing.
Frequently asked questions
Why do landlords charge more for restaurant uses?
Restaurants generate higher utility load, grease, odors, and pest pressure than typical retail. Landlords price in the elevated maintenance and risk via use-clause premiums. The standard premium is 1.32x median retail PSF rate per CBRE Restaurant Trends 2026.
What’s percentage rent in a restaurant lease?
A common structure is base rent equal to 6 to 8% of projected gross sales, with overage of 5 to 7% above a breakpoint. Make sure the breakpoint is calibrated to your conservative sales forecast, not the landlord’s optimistic one.
What’s the “natural breakpoint” formula?
Natural breakpoint = annual base rent / percentage rate. For example, $84,000 base rent at 6% = $1.4M sales breakpoint. You only pay percentage rent on sales above $1.4M.
How much does restaurant kitchen buildout cost above TI?
For a second-gen restaurant refresh: $50 to $100/SF out of pocket above TI. For a first-gen conversion to restaurant: $200 to $300/SF out of pocket. Plus FF&E (kitchen equipment) at $80K to $300K depending on concept.
Are grease trap and hood included in TI?
Sometimes, depends on landlord. Class A restaurants in trophy locations often get grease trap and hood included in TI. Class B and second-gen retail conversions usually have tenant pay these out of pocket, even with healthy TI allowance.
How does percentage rent affect cash flow?
Percentage rent is paid monthly or quarterly based on actual sales. Above the breakpoint, every additional dollar of sales generates 5 to 7% of additional rent. For a restaurant doing $2M in annual sales with $1.4M breakpoint at 6%, percentage rent = ($2M - $1.4M) × 6% = $36K/yr.
What’s the failure rate on restaurant lease deals?
Industry data: ~30% of restaurants close in first year, ~60% by year 5. Landlords underwrite this risk via higher rent and stricter personal guaranties. Always negotiate good-guy clause to limit personal exposure.
Should I sign percentage-only or base+percentage?
Base + percentage is the dominant structure. Percentage-only is rare and typically reserved for trophy fine-dining locations where landlord shares upside. For most concepts, base + percentage with a natural breakpoint is the right structure.
Related guides
- Retail space lease cost per square foot
- Commercial lease cost per square foot metro index
- Tenant improvement allowance calculator
Sources
- CBRE Restaurant Trends 2026 accessed 2026-05-02
- JLL Retail Outlook accessed 2026-05-02
- Bhumi Calculator Tenant Improvement Costs accessed 2026-05-02
- National Restaurant Association industry data accessed 2026-05-02
Not financial or legal advice. Estimates based on publicly available market data and broker reports. Commercial real-estate is highly local and deal-specific. Consult a licensed commercial real-estate broker and a real-estate attorney before signing any lease.