Understanding Chick-fil-A Ground Lease Trends in the Current Market
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As one of the fastest-growing and most sought-after quick-service restaurant chains in the United States, Chick-fil-A continues to be a significant player in the commercial real estate market. For commercial real estate investors and developers, understanding the trends and factors influencing Chick-fil-A's ground leases is crucial for making informed decisions.
Key Market Insights (2022-2024)
Over the past three years, Chick-fil-A's ground leases have exhibited certain trends that shed light on the brand's strategic site selection and investment approach. These leases, typically 15 years long with 10% escalations every five years, are corporately guaranteed, making them attractive investments for property owners.
Rent Per Acre Trends:
The average rent per acre for Chick-fil-A ground leases has fluctuated, with a higher average in 2022 compared to 2023 and 2024. This variation can largely be attributed to the inclusion of premium locations like New York and California in the 2022 data.
On average, across all locations, the rent per acre settled at approximately $101,039.
Lot Size and Value Correlation:
There is a noticeable inverse relationship between lot size and rent per acre. Larger parcels tend to command lower rents per acre, which is consistent with findings from similar analyses in other sectors.
The average lot size for Chick-fil-A locations analyzed was 1.63 acres, with the most common range being between 1.1 and 1.8 acres.
Site Selection Priorities:
Traffic counts and population density within a 3-mile radius are significant factors that influence Chick-fil-A’s ground rent per acre. Higher traffic and denser populations generally correlate with higher rents, underscoring Chick-fil-A’s preference for locations that offer greater visibility and customer accessibility.
Interestingly, median household income within the same radius shows little to no correlation with the rent per acre, indicating that Chick-fil-A values traffic and customer access over income levels in its site evaluations.
Implications for Investors and Developers
For those looking to attract Chick-fil-A or similar quick-service tenants, focusing on locations with high traffic and moderate to large population densities is likely to result in more favorable lease terms. Additionally, optimizing the lot size to meet operational needs without excess acreage could be key to negotiating better rents.
As the market for ground leases continues to evolve, particularly in a high-interest-rate environment, understanding these dynamics will be crucial for both developers and investors looking to maximize their returns on Chick-fil-A properties.
Conclusion
Chick-fil-A’s ground lease trends from 2022 to 2024 highlight the importance of strategic location selection, with traffic counts and population density playing pivotal roles in determining rent per acre. As Chick-fil-A continues to expand, these insights will be valuable for those involved in the commercial real estate market, offering a roadmap for maximizing the potential of these highly desirable properties. commercial real estate market, offering a roadmap for maximizing the potential of these highly desirable properties.
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