Key Money
Key money is a one-time payment made to an outgoing tenant—or sometimes a landlord—for the right to assume an existing lease, acquire installed fixtures and equipment, or benefit from established goodwill. In NYC, key money for restaurant spaces typically ranges from $25,000 to $500,000+ depending on location, buildout quality, and remaining lease terms.
Why It Matters for Operators
For hospitality operators, key money can dramatically reduce the time and cost to open. A fully built-out restaurant space with an existing venting system, grease trap, and Ansul system could save $200,000+ in construction costs. However, overpaying for key money on a space with a short remaining lease term is one of the most common and expensive mistakes new operators make.
FWDRE Insight
Always calculate key money against the cost of building out a white box from scratch. If the existing buildout saves you $300K in construction but the seller is asking $400K in key money, you're overpaying. We also recommend verifying that all equipment included in the key money deal is in working order—replacing a failed walk-in cooler after closing can cost $15,000-$25,000.
Related Terms
A move-in ready commercial space with all systems, equipment, and finishes in place for immediate operation.
A previously occupied commercial space with an existing buildout from a prior tenant in the same or similar use.
A non-binding document outlining proposed lease terms before formal lease negotiation begins.
A raw commercial space delivered with basic utilities but no interior buildout, finishes, or equipment.
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