How to Start, Build or Buy a Strip Mall Business

December 9, 2022

Adam Hoeksema

I have been thinking lately about businesses that might hold up best in a recession, and specifically in real estate it seems like there are just a lot of headwinds everywhere you look with inflation, interest rates increasing, remote work is hurting office space, industrial real estate and warehousing will all likely be under quite a bit of pressure during a recession as businesses slow down.  But if there is one type of real estate business that seems like it could be the cockroach of real estate it might be the strip mall.  

Now I mean the cockroach of real estate in the nicest way possible.  I mean that a strip mall just seems like it is resistant to much of the headwinds in real estate.  

I saw a post, I believe it was on Twitter and probably posted by StripMallGuy (yes there is actually an account on Twitter focused on investing in strip mall real estate), and the basic premise of the post was that the businesses that are in strip malls are Amazon resistant.  Hair and nail salons, carry out restaurants, medical offices, check cashing, phone retailers and repair shops, etc.  These are all businesses that will probably be the hardest for an Amazon to replace.  

I thought that was a really interesting point, which got me interested in diving into the strip mall business finances a bit more.  So as is my typical process with many of my blog posts, I am going to do my own research to answer many of the questions that I have about the industry and answer those questions for you as I learn.  

I am the Founder of ProjectionHub which helps entrepreneurs create financial projections for potential investors and lenders, so I love to do a deep dive into various businesses and learn how the finances work.  Throughout this post I will reference our three strip mall financial model templates which I will use just to create different financial model scenarios for a strip mall as I learn:

  1. Existing Strip Mall Financial Projection Template - Best for existing strip malls or smaller, simple strip mall properties where you don't need to raise outside capital from lenders and investors.
  2. Strip Mall Developer Financial Model - This is our strip mall developer template that is best when developing and constructing a new strip mall facility. Includes financing and construction budget sections.
  3. Strip Mall Acquisition Projection Template - This is a template for strip mall investors that might look to buy, renovate, increase net operating income and then ultimately sell a strip mall.

Here is what I plan to cover in this article:

Strip Mall Financial Model Example

Here is a sample from our strip mall financial model template at a glance tab:

Ok with that out of the way, let’s dive in and learn all about the strip mall business! 

What is a Strip Mall

A strip mall is a single commercial building broken into several smaller units that are rented out to various tenants like restaurants and retail stores.  The strip mall will typically have a large shared parking lot in front of the building.  Generally a strip mall is a single story building and located in a high traffic area. 

Common Strip Mall Tenants

The most common type of businesses to rent space in a strip mall include:


  • Hair Salons
  • Nail Salons
  • Med Spas

Financial Services

  • Banks
  • Insurance Agents
  • Financial Advisors
  • Real Estate Agents


  • Urgent Care
  • Primary Care
  • Dental Office
  • Chiropractic

Food & Beverage

  • Carry out food
  • Coffee Shop
  • Sports Bar
  • Liquor Store


  • Gyms
  • Martial Arts
  • Dance Studios

Other Category

  • Check Cashing
  • Daycare Center
  • Cell Phone Retailer & Repair
  • Dollar Store
  • Dry Cleaner
  • Jeweler
  • Print, Copy, Shipping Center

For an exhaustive list of strip mall tenant ideas you can check out this list.  Again as I write this list it becomes clear again that many of these businesses are “Amazon resistant.”

How Much Does it Cost to Build a Strip Mall

The average strip mall costs $2.5 million to build according to ProEst

ProEst provides some other helpful details to help you estimate the cost of building your proposed strip mall.  

Average Number of Square Feet for a Strip Mall

The average strip mall is between 7,000 and 20,000 square feet. 

Average Number of Tenants per Strip Mall

The average strip mall will have between 3 and 12 tenants. 

Average Construction Cost per Square Foot for a Strip Mall

The average construction cost per square foot for a strip mall is $200 to $300.  

For our example strip mall that I am going to model, I am going to assume a 12,000 square foot building with a construction cost of $250 per square foot plus a $500,000 cost for the land. Our total construction cost would be $3.5 million.  Below is a screenshot of entering this into our financial model:

You might decide that you don’t want to build a strip mall from the ground up, so I wanted to know what it costs to buy a strip mall. 

How to Buy a Strip Mall

The first step in buying a strip mall is simply to find a strip mall that is available for sale.  I always love to look at LoopNet to see examples of real estate for sale. There are currently over 500 strip malls listed for sale in the US alone on LoopNet. 

In the market to buy a strip mall business? A QofE Sniff Test can illuminate the financials, guiding your investment decision.

How do you Value a Strip Mall

A common way to value a strip mall is to use a cap rate.  The calculation would be pretty simple, so let’s just use some example numbers to demonstrate the calculation:

# of square feet = 12,000 sq. ft.

Annual rent per square foot = $30

Annual rent = $360,000

Cap Rate = 5%

Strip Mall Value = Annual Rent / Cap Rate

$360,000 / 5% = $7.2 million

Now you need to keep in mind that cap rates are changing as the market changes, so you will need to research what cap rates other similar strip malls are selling for.  The cap rate makes a huge difference.  For example, the same strip mall with an 8% cap rate would be valued at $360,000 / 8% = $4.5 million. 

One thing I think you can be pretty certain about is that a strip center with existing tenants is going to cost more to acquire than building a new strip mall will cost, BUT once your new facility is built you have to fill it with tenants which comes with additional cost of sales and marketing and potentially tenant improvement budgets, etc. 

How Much Does it Cost to Buy a Strip Mall

You can find strip malls for sale for as little as $135,000 and up to $22 million.  

I sorted the strip malls for sale on Loopnet by price and found a 20,000 SF strip center for sale for $135,000. 

Then on the high end I found a 30,000 SF strip mall for sale for $22 million which was a 5% cap rate. 

Clearly there is a massive range in the price to purchase a shopping center, which is why a simple cap rate calculation is a nice way to compare opportunities. 

How to Fund a Strip Mall Acquisition

You can fund the acquisition of a strip mall with a mix of equity invested into the deal plus a commercial real estate loan.  If you have a business that will be operating in the strip mall and occupy over 50% of the space, you would also likely qualify for an SBA 7a or 504 loan.  If you are acquiring the property purely as an investment property, then you are probably going to be looking at a CRE loan at a bank.  This video walks through the scenario of buying and selling a strip mall.

In our example, we are going to assume that we invested $1,000,000 and borrowed 75% of the cost of the $3.5 million land and construction cost which totaled $2.6 million and we are assuming the loan will amortize over 25 years. 

How Much is Rent in a Strip Mall

Average rent per square foot in a strip mall in the US is roughly $22 per square foot according to Statista

average strip mall monthly rent chart from 2020 to 2022

You can see the difference between the various regions of the US as well. 

In our example we are going to assume that you have 12,000 square feet broken into 10 units.  The 2 units on the ends will rent for $25 per square foot and the center units will rent for $21 per square foot as seen below:

What are Typical Operating Expenses for a Strip Mall

Often a strip mall will lease space on a triple net basis which means that the tenants are all responsible for their pro rata share of nearly all of the operating costs like insurance, utilities, maintenance, and grounds keeping.  If this is the case in your situation, then you will have very little in operating expenses.  In our example, we assumed some marketing expenses, accounting, professional services, some insurance and repairs costs that we assumed the landlord might be responsible for. If you are not triple net you will need to estimate the other operating costs displayed. 

list of typical operating expenses for a strip mall

We also assumed roughly $25,000 for a part time property manager. 

By far, our largest expense was the interest expense on the loan.  The $2.6 million loan at 6.5% amortized over 25 years amounted to a monthly payment of roughly $17,700 per month.  

How Much Do Strip Mall Owners Make?

In our example, the business never actually turned a GAAP profit in the 5 year forecast, but this is likely the norm for commercial real estate because of the cost of interest and depreciation.  You can see our profit and loss at a glance below:

Although we did not have a net income, we did have EBITDA of 78% and were cash flow positive by roughly year 3 as we increased rent and reduced vacancy rates. 

Is the Strip Mall Business Profitable?

So here are my summary findings.  This actually seems to be a tough business to make the math work out.  Strip mall owners really can’t afford to lose a major tenant, and there isn’t a bunch of room to repave the parking lot or put on a new room etc. Clearly there are business owners making a profit in the strip mall business, but I guess my takeaway is that you want to really know what you are doing, make sure you don’t overpay or get over leveraged because there may not be much room for error.  

If you are thinking about building or acquiring a strip mall and need help filling out a financial model for your unique situation make sure to check out our strip mall template and reach out with any questions at all!  

About the Author

Adam is the Co-founder of ProjectionHub which helps entrepreneurs create financial projections for potential investors, lenders and internal business planning. Since 2012, over 50,000 entrepreneurs from around the world have used ProjectionHub to help create financial projections.

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