Is Your Lease Eating Your Profits? Benchmarking Occupancy Costs in a Small Brewery
Occupancy cost for your brewery consists of base rent and any NNN (triple-net) charges. Comparing these numbers to your annual revenue gives you your occupancy percentage of revenue - a valuable measuring stick for benchmarking. The generally recommended upper limit is around 10%. Anything above that can be a red flag, especially if your revenue has been volatile. The dollar-per-square-foot rates, in your local market, can also serve as a benchmark alongside your occupancy percentage of revenue. Together, they’ll help you negotiate smarter when your lease comes up for renewal.
As expected, I built a Lease & Occupancy Cost Analyzer to help you calculate these numbers and compare lease options side by side.
Lease Calculator
What counts as occupancy cost for your brewery (and what doesn’t)
Occupancy cost covers more than just rent - it’s the total cost of keeping your brewery in that space, month after month, year after year. Understanding this number is critical because it’s one of the biggest expenses most breweries face, right up there with labor and raw materials.
Here's how to break it down:
Start with your base rent and multiply it by 12. That gives you your annual rent - your starting point. For example, $6,500 per month in base rent = $78,000 per year.
Then add in your NNN (triple-net) charges. These are fees passed through by the landlord and usually include property taxes, building insurance, and common area maintenance. That maintenance might include landscaping, snow removal, trash service, security, lighting… things of that nature. These charges can easily add 25 to 50% on top of your base rent, so ignoring them gives you a false sense of what you're really paying.
Exclude these from occupancy cost:
Utilities like electricity, water, and internet
Equipment leases (e.g., keg washers, glycol systems)
One-time buildouts or renovations, even if they’re financed
Those are still important costs, but they’re not tied directly to your lease and don’t belong in this calculation. By focusing solely on the recurring cost of your physical space, you can benchmark accurately and compare across time or between locations.
If you're comparing lease options, use the Lease & Occupancy Cost Analyzer (above) to plug in your rent and NNN numbers and see how they stack up against your brewery’s revenue.
How to calculate your brewery’s occupancy % and compare it to benchmarks
Once you’ve totaled your annual occupancy cost (base rent plus NNN charges—the next step is to compare it to your brewery’s revenue. This gives you your occupancy cost as a percentage of revenue: a simple but telling metric.
The formula is: (Base Rent * 12 + NNN Charges) ÷ Annual Revenue
This tells you how much of every dollar you bring in is being consumed by your facility costs. It’s a quick check on whether your space is financially sustainable.
Let’s say your base rent is $6,500 per month, $78,000 per year. Your NNN charges are $18,000 per year. Revenue is $1.2 million per year.
Total occupancy cost = $96,000. As a percentage of revenue = $96,000 / $1,200,000 = 8%
So, what’s a good number?
Consultants and financial advisors often suggest staying under 10%. It’s not a hard and fast rule, but it’s a useful target:
< 8%: You’re probably in good shape
8–10%: Still manageable, but watch closely
> 10%: Could be a threat to your margins, especially if revenue drops or other fixed costs rise
Your business model also affects how aggressive you can be. Taproom-heavy breweries can tolerate a higher percentage because of stronger per-barrel margins. Distribution-focused breweries should aim for 6–8% due to tighter margins
This is a quick, easy calculation. One worth doing right now. It’s easy to let lease costs fade into the background while everything else demands your attention. They’re often the quietest drag on your profitability.
Calculate this number at least once a year. Ideally when reviewing your year-end financials, and always before signing a new lease or renewal. Your rent might not have changed, but your NNN and revenue likely have. I
The Lease & Occupancy Cost Analyzer (above) will help you.
When your brewery lease might be silently crushing your margins
You don’t need a sudden rent hike to feel the squeeze. Leases can erode profitability slowly and quietly. The danger isn’t always in the sticker price, it’s in the way those costs creep up on your revenue.
Watch for these red flags:
Revenue is flat or declining, but occupancy costs keep rising
Your occupancy % has been above 12% for two years (or more)
You’re approaching a lease renewal and haven’t looked closely at how NNN charges have grown
Even if your rent stays “the same,” pass-through charges like property taxes and CAM can rise 3–5% annually. If you’re not tracking them, or didn’t negotiate caps, they can quietly balloon and push your occupancy % past your target.
Who can help?
Your bookkeeper or operations manager can review occupancy costs quarterly
A CPA or fractional CFO can help analyze lease terms and forecast 3–5 years forward
Expect to pay $25 to $75 per hour depending on who you work with
Running a brewery is hard enough. Don’t let a poorly structured lease, ,or your own blind spot, chip away at your margins. Know your numbers and revisit them regularly.
Take five minutes to check your brewery’s lease math
If you haven’t calculated your occupancy percentage recently (or ever), now’s the time. It only takes a few numbers: your monthly rent, your NNN charges, and your annual revenue. The math is quick, but the insight is powerful.
Small rent increases or growing pass-through charges may not feel like much month to month, but over time they can silently eat into your profit. That can hold you back from reinvesting, expanding, or even just operating comfortably.
Know your number. Track it. Use it. This is the kind of simple financial clarity that keeps small breweries alive and growing. It also gives you real leverage when it’s time to renegotiate or rethink your lease - before that monthly payment becomes a liability you can’t ignore.
