Cup & Leaf Cafe pt. 2: Finding and Leasing a Commercial Space

By Nat Eliason in Entrepreneurship

This is article #2 in the Cup & Leaf Cafe series. You can read the first article on why I’m opening a cafe here.

Once I’d decided to open a cafe, the next question was where.

It would obviously be in Austin, and part of my motivation was actually that Austin really lacked good tea places.

There’s one notable one in north Austin, and a small one far east of downtown… and that’s about it. And more importantly, there are zero in East Austin near downtown where I was hoping to open it. All you get when you search are coffee or boba places:

Why East Austin? First, the lack of competition like I mentioned. People in Austin, especially East Austin, are very into the healthy hipster coffee shop vibe, so having a small tea house felt like a natural fit.

Second, the neighborhood is growing like a weed. You can’t walk a block without seeing some kind of construction, most of it turning rundown blocks into 4-6 story apartment complexes.

Third, related the the second point, there’s a shortage of coworking friendly coffee shop space. I’ve never been in another area where it’s so hard to find a table to sit at with your laptop. The two coffee shops in walking distance from me are constantly overrun, as are pretty much every other cafe on the east side.

Fourth, similar to what I wrote about in part 1… I want it. I love East Austin, and having my own little slice of it is a dream.

Picking a neighborhood is easy though, next we needed to find a space.

Finding a Commercial Space for Lease

Here’s where things started to get tricky. East Austin booming is great for giving us a high chance of success, but it’s not great for finding a space to lease.

Commercial spaces for rent are typically already zoned for a certain type of facility. Office space, Retail, Restaurant, Industrial, and Medical are the most common. And as you can imagine, most restaurant space here gets scooped up very, very quickly.

Here’s a view of all the Restaurant zoned places currently up for lease in Austin proper.

Yeah… there are 7. And most of those will be gone in a week or two. So I knew if I wanted one, I’d have to move pretty fast when something good popped up.

Now, to be fair, I could have tried to rent a non-restaurant place and get it rezoned, but that would have been a whole other set of headaches I’m not trying to deal with. At least not for my first real world venture.

The first step to finding a space then was to sign up with Loopnet (like Zillow for commercial rentals) and have a saved search for the neighborhood I was looking in. This way I got alerted when a new restaurant zoned place showed up.

Then… I just had to wait. After a couple months, two places popped up around the same time, and both happened to be in walking distance of my apartment.  

The first one was pretty interesting. It was an old, early 1900’s East Austin bungalow that was pretty rundown, but the landlord was committed to getting it renovated and turned into some sort of cafe or restaurant. The previous renter had backed out after a year of getting the land rezoned, so it was back on the market.

The downside with this one was that it really hadn’t been cleaned up much since it was built, and we were looking at $300,000+ in renovations, plus a year of work, to get it to the point where I could start doing permitting.

The landlord would have paid a lot of that, but I wasn’t sure I was ready to spend a year and a ton of money solving that many problems.

The second space was the polar opposite. It wasn’t a brand new building, but it’d been renovated, and would require zero work on the core of the structure to get it ready to open. We’d be able to start work on the permitting and renovation right away.

Plus, it had a few other really attractive perks. It had a huge parking lot, it had a big outdoor area, it had some upstairs storage space for our inventory, and it had a huge flat wall we could paint on.

On top of that, there was already a really good restaurant, Gotham, operating in the building, which meant there were some synergies to the location, and there was someone I could pester with questions.

The interior wasn’t perfect for a cafe. Most notably, there was no “backroom” behind where the bar would be, but I figured we could work around that. It looked like a strong spot, and I wanted to move quickly, so we started the lease signing process.

Signing the Lease

This part isn’t that complicated, it’s basically the same as signing a residential lease. At least it was for us.

The big difference is the timespan. Residential leases are usually for a year, commercial leases are for 3-5 years, or even longer. We signed a 3 year lease with options to renew.

Another difference is pricing. Technical residential leases are also by square foot, but you’re usually getting a clear fixed price. With commercial leases you’re paying by the square foot per year. So for us, the total square footage was about 853, at $45 / sqft / year.

So our annual rent is about $38,400 and our monthly rent is $3,200. Plus utilities and such.

The last thing we got was a two month free rent concession. This is a bigger deal in commercial rentals since you’re not going to be making any money for the first few months, so the longer you can go before you start paying, the better.

Since we had to pay for a month at signing, and got the first two months free, we’re technically paid up through May 15th.

That gives us three months to try to get everything up and running… we’ll see if we make it!

Costs so Far

Now that there's some money getting spent, I'll start recording how much everything is costing.

Security Deposit: $3,718.70

Feb 15 - May 15 rent: $3,718.70

POS Hardware: $741.51

Total: $8,178.91

As always, there will be many more posts in this series. Be sure to sign up below for future articles.

Update: Click here to read part 3 on getting our permits!

Footnotes

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