If your strip center or retail property has an outparcel, meaning a pad site on the same lot that could be separately developed, you might be sitting on hidden value.
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Document outparcel location and size: Know exact acreage and zoning. Calculate per-acre value based on traffic counts and market comps. -
Research existing restrictions: Check your existing tenant leases for restrictions on what can be built on outparcels (no competing uses, parking requirements, etc.). Some anchors have veto power. -
Explore both options: sell vs ground lease: Get market feedback on selling the pad versus ground leasing it. Ground leases often produce higher net present value but require tenant credit approval. -
Price outparcel separately from building: If selling the entire property, make sure the buyer (and you) understand outparcel value. It should be priced independently from strip center income.
What makes outparcels valuable
Outparcels on busy roads get serious attention from QSR chains (Chick-fil-A, Starbucks, Taco Bell), banks, and pharmacy/medical tenants. These users want visibility and traffic and they’re willing to pay premium rents on ground leases or purchase the pad outright.
What maximizes outparcel value
- Pad site is 1+ acre on high-traffic road (20,000+ cars/day)
- Clear zoning for retail/food service/bank use
- Existing utilities accessible (water, sewer, power)
- No existing tenant lease restrictions
- National tenant interest or existing tenant ready to build
What reduces outparcel monetization
- Shared access/utilities with main building
- Anchor tenant lease restricts use
- Poor visibility or secondary road location
- Zoning limits outparcel development
- Lot subdivision and utility separation needed
A 1-acre outparcel on a road with 20,000+ cars per day in Charlotte or Raleigh could be worth $500K-$1M+ depending on zoning and utilities. That’s value that exists independent of your strip center’s income.
Ground lease vs. sell
You have two options with an outparcel. Sell it outright to a developer or tenant. Or ground lease it, where you retain ownership of the land and the tenant builds their own building on it. Ground leases are popular with national chains and can provide a very attractive long-term income stream.
Ground lease income is typically valued at 5-6% cap rates because the tenant credit is strong and the income is predictable. That’s a different (and often better) valuation than the strip center itself.
Related: Hold or Sell Your Commercial Property: How to Decide
Related: How I Determine My Offer Price
The complication
Outparcels sometimes have shared access, parking, or utilities with the main building. Splitting off the outparcel might require a lot subdivision, a new curb cut, separate utility connections, and shared access easements. All doable but it costs money and takes time.
Also, check your existing tenant leases. Some retail leases include restrictions on what can be built on outparcels (no competing uses, parking ratio requirements, etc.). You don’t want to find out your anchor tenant has veto power over outparcel development after you’ve already made plans.
What I’d recommend
If you’re selling your retail property and you have an outparcel, make sure the buyer (or in my case, I) understands the outparcel value. It should be priced separately from the strip center income. Some sellers leave hundreds of thousands on the table by not highlighting the outparcel potential.
Seller takeaway
If you have outparcel land, don’t let it be bundled into the strip center sale without separate valuation. Call Jim at 980-600-3839 to understand what your pad site is worth and whether ground lease or sale is optimal.
Got an outparcel you’re not sure what to do with? Call me. 980-600-3839.
Ready to explore your options?
Tell us about your property. We will follow up within one business day.
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