Retail Trends We See

Posted on September 8, 2010 by Scott Kadish
Toys R Us is leasing a large number of sites on a temporary basis: smaller stores and only for the Christmas season. Temporary leasing might be a trend to capitalize on, especially where you have vacant space in a decent geographic market.  And if you can combine it with a different, complimentary seasonal concept (ice cream or frozen yogurt? tax service?), it might eat up otherwise vacant space.
 
Costco is looking at former department stores for expansion locations. Costco would be a great addition to any center, even upscale ones. It has been shown that the consumer who likes Nordstrom also likes the bargains and experience at Costco. Many upscale centers have prohibitions on discount or club stores. While the prohibition may be outdated, it may nonetheless still apply.
 
Allowances are becoming increasing at risk. tenants are concerned about a Landlord's ability to fund in these challenging economic times and are requiring significant dollars to be paid up front or early in the process. Conversely, Tenants who are having difficulties at other locations are defaulting after receipt of allowance payments but prior to opening and so a Landlord is placed at great risk if it pays any allowance prior to opening.  If  the tenant has off set right for any non-payment, tenant can probably protect itself from a defaulting landlord.  BUT, the tenant needs to preserve this right in any SNDA it executes.  For large allowance amounts, the time to recoup may be unacceptable. In these cases, an escrow at time of delivery and payment upon opening may be better.
 
Book stores have issues. Long considered an ideal anchor for a life style center, the E Reader and low pricing of big box retailers make the book store a difficult retail concept.
 
Outlet centers are really popular. Traditional centers should capitalize and try to include outlets in part. Again, landlords should revisit the prohibited uses in effect at the center.
 
Let us know what are other trends you are seeing ?
Tags: , , , ,

Some Good News About Empty Big Boxes

Posted on August 24, 2010 by Beth Farrell

The current economic downturn and the corresponding contraction of the retail sector have resulted in a glut of vacant “big-box” retail stores in shopping centers across the country. Vacant big-box spaces pose special challenges for landlords and communities. While the number of vacant big-box spaces is daunting, there are glimmers of hope as landlords and communities have become increasingly creative in their re-adaptive uses of these dark spaces. For creative landlords who are willing to invest in redesigning and redeveloping vacant big-box spaces, big boxes can provide opportunities for both landlords and communities.

Across the U.S., vacant big-box spaces have been successfully retrofitted for use by nonretail users such as churches, schools, colleges, medical and dental facilities, libraries, office and municipal tenants, health clubs, and other tenants who require large parking areas. Because traditional retail tenants are not available to fill vacant big-box spaces, Landlords should strongly consider non-traditional tenants for re-adaptive uses of vacant big-box spaces because they fill up highly visible vacant spaces (and community eye sores); they tend to be long-term, stable, credit tenants who may invest up-front in infrastructure improvements; and they are often well received by the community because of the benefits they provide.

 

 

Vacant big-box spaces also have been redesigned as antique malls where multiple rent-paying vendors operate from individual booths within the mall.  To avoid a flea market atmosphere, landlords implement strict rules governing individual displays, merchandise, continuity of use and cohesion of space, marketing, and hours of operation. Individual vendors who do not comply with the rules are asked to leave.

Other non-traditional retail concepts for vacant big-box spaces include farmer’s markets and car dealerships.  Weekend farmer’s markets have been established in parking lots of vacant big boxes with great success. Creative landlords are even contemplating expanding the farmer’s market concept to the interior space of the vacant big boxes during colder months.

Landlords across the country are working creatively and in tandem with local communities to redesign and redevelop empty big-box spaces for use by non-traditional tenants who offer investment, stability, continuity, and benefits to owners and community residents alike.
Tags: , , , ,

Vacant Big Box Retail Stores

Posted on July 8, 2010 by Beth Farrell

The current economic downturn and the contraction of the retail sector have resulted in an increasing number of vacant “big box” retail stores in shopping centers across the country. A “big box” is a freestanding building occupied by a single retail tenant that contains between 20,000 to 200,000 square feet of space and is surrounded by a large parking area. Big box structures are designed to house large inventories in an efficient and cost-effective manner. They are constructed to the meet the specific needs of the big box tenant. Examples of big box retailers include Wal-Mart, Target, Costco, and Home Depot.

As the number of vacant big boxes increases, owners, developers, and communities are faced with the challenge of what to do with them. Big boxes have been redeveloped into libraries, community centers, charter schools, churches, museums, and civic centers. While this redevelopment is promising, churches, schools, and other public uses generally are exempt from real estate taxes and they do not generate sales taxes. Ideally, the new use of the big box space will generate sales and property taxes as the big box retailer did, but oftentimes, this is not the case. The failure of a re-use tenant to generate sales and property taxes further contributes to the already daunting fiscal challenges faced by many local communities. Lower rent tenants, such as discount retailers and grocers, are also options for reuse of vacant big box space but owners may be concerned that lower rent tenants may devalue the property.

Redeveloping vacant big boxes present special challenges to communities, owners, and prospective tenants. Leases or deed covenants may contain restrictions that may impact the ability to re-lease the property. Zoning and land use issues may impede or constrain the future use of the space. Co-tenancy clauses in leases of other tenants in a center may result in tenants abandoning a center if a big box tenant vacates its space thereby triggering a landlord default under the lease.

While creative ideas for the reuse of vacant big box spaces exist, it will take the support of local governments and communities as well as available financing to make the redevelopment of these big boxes work.
 

Tags: , , , , ,