ICSC's latest newsletter about the Co-Tenancy retail lease clause paraphrased: Amid the shifting dynamics of retail leasing, traditional co-tenancy restrictions wielded by anchor tenants have lost their once firm grip. In the early 2000s, an oversupply of retail space tilted the balance of power toward retailers, but today's landscape tells a different story. Notably, restrictions have relaxed, allowing for a broader range of tenants such as gyms, boutique fitness studios, entertainment venues, medical facilities, and co-working spaces. This shift reflects the changing retail environment, marked by subdued construction activity and a focus on reinvigorating struggling retail assets. Landlords now find themselves in a position of strength, with increased bargaining power. To adapt, landlords are renegotiating leases to accommodate evolving tenant needs while safeguarding the shopping center's character. This involves granting waivers for tenants falling within certain categories, such as medical services, and refining language to address specific concerns. The retail industry's evolution demands a more nuanced approach to co-tenancy restrictions, as yesterday's threats may no longer hold true. Anchors, recognizing the need for diverse traffic generators, are driving discussions on what types of tenants attract visitors to shopping centers. While concerns about parking congestion persist, landlords and tenants are finding compromise by locating parking-consuming uses strategically within the property. Flexibility is key in this evolving landscape. The definition of anchors has expanded beyond traditional retailers to include restaurants, gyms, and public spaces. Although some leases still prohibit certain uses, there's a growing willingness to negotiate waivers to foster mutually beneficial relationships between landlords and tenants. However, negotiations can be complex, often involving trade-offs such as reduced rent or term extensions. Interpretation of lease language and evolving trends, such as the rise of entertainment concepts like escape rooms and virtual reality venues, further complicate matters. Looking ahead, emerging trends like pickleball and the legalization of marijuana pose new challenges and opportunities for landlords. While these trends may reshape the retail landscape, uncertainties remain, particularly regarding regulatory changes and market acceptance. In summary, the retail leasing landscape is undergoing a profound transformation, driven by shifting consumer preferences and market dynamics. Adaptability and collaboration between landlords and tenants are essential to navigate this evolving terrain successfully.
Hue Chen (Retail CRE)’s Post
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Exciting News in U.S. Retail Leasing... According to a Costar report, U.S. shopping centers are seeing a remarkable resurgence, experiencing the strongest leasing activity in two decades. This post-pandemic surge in demand is driving a revitalization of the industry. Leasing times have plummeted to a record low of just 8.5 months on average, marking a significant turnaround. Key Points: - Rapid Leasing: An impressive 80% of shopping center spaces are now leased within 6 months of becoming available, and a staggering 98% are leased within 9 months. This speed is unprecedented and highlights the intense demand for retail space. - Rising Rents: With vacancies dropping, landlords are seizing the opportunity to raise rents. The combination of lower vacancy rates and higher demand is pushing rental rates upward, benefiting property owners and investors. - Restaurant Boom: Restaurants are at the forefront of this leasing frenzy. Their strong demand is boosting foot traffic and injecting new vitality into shopping centers. Diners are back, and they're bringing vibrancy and economic benefits to these retail hubs. Looking Forward: While the current trend paints a rosy picture, it's essential to remain cautious. The robust leasing activity and strong retail demand we see now might face challenges down the road. Uncertain consumer confidence could impact retail spending, posing potential obstacles for sustained growth. David Simon, CEO of Simon Property Group, wisely noted, "We're not immune to the broader economic environment. A reasonable slowdown could be on the horizon." This dynamic shift underscores the resilience and adaptability of the retail sector to new consumer behaviors. The rapid leasing and rising rents are promising, but the future is not without its risks. Keeping an eye on consumer confidence and economic indicators will be crucial in navigating the path ahead.
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Helping Brands to Retail | From Strategy to Roll-Out | Independent Retail Real Estate Expert | MD NEXXT IN RETAIL
Renegotiating rents – 4 steps how to optimize cost 💴 💰 💶 In today's competitive retail environment, managing costs is crucial for maintaining profitability and ensuring the long-term success of your business. One of the most significant expenses for any retail operation is rent, which can dramatically impact your bottom line. The first step in renegotiating rents is to conduct a thorough analysis of your current portfolio. This involves evaluating the performance of each store and understanding the relationship between turnover and rent. Typically, rent should not exceed 20% of your turnover, with some sectors like gastronomy often requiring even lower percentages, down to around 12% and less. This ratio can vary depending on the location and the strategic importance of the store, but maintaining an optimal rent-to-turnover ratio is key to cost management. 1. Analyze portfolio performance: Evaluate turnover/rent ratio: Assess each store's turnover relative to its rent. If the rent is disproportionately high, this is a red flag. Location and Purpose Assessment: Consider the strategic importance of each location. High-rent locations may be justified if they drive significant traffic and sales. 2. Identify opportunities for negotiation: Renegotiate existing leases: If you find that rent is too high but the location is still valuable, initiate negotiations with your landlord. Offering an early lease renewal can be an incentive for landlords to lower rent. Leverage market conditions: Currently, many cities across Germany and Europe have a significant number of vacant retail spaces. Use this to your advantage by negotiating better terms or relocating to more cost-effective spaces. 3. Strategic relocation and closure: Consider relocation: If negotiations do not yield favorable results, relocating to a more affordable location can be a viable option. Evaluate Store Closures: In some cases, it may be necessary to close underperforming stores, particularly if the location and costs do not align with your brand's overall strategy. 4. Apply the pareto principle: Focus on high-impact stores: Often, 20% of your stores will account for 80% of your cost and therefore potential savings. Conduct a detailed analysis to identify these "low-hanging fruits." Targeted negotiations: Prioritize renegotiations and strategic changes for these high-impact stores first to maximize your savings. By thoroughly analyzing your portfolio, identifying opportunities for renegotiation, and making informed decisions about relocations and closures, you can significantly reduce costs and improve profitability. The current market conditions provide a unique opportunity to negotiate better terms, so it's essential to act now. Need help with the process? Connect with me, and let's discuss how we can work together to optimize your retail portfolio for maximum efficiency and profitability. Slide in my DM now!
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I came here to nerd out on retail. So, here we go: Yes, the industry is absolutely seeing dramatic increases in tenant renewal rents. It's being experienced by landlords large and small, all across America. It's a function of lots of different things, but we need to be careful about how far tenants are stretched. Why are folks willing to pay so much to renew? Well, moving no longer makes much sense. What would have been a $300,000 restaurant buildout 5 years ago can now easily be over $500k-$600k. Tenants often obtain loans for these buildouts, and rates on those loans have skyrocketed. The permit that used to take 3 months to get can now commonly take 6-9 months, or more. Cities are moving much slower now than they did just a few years ago, and inspections are dragging on and on. There is a sticker shock element going on -- taking a vanilla shell space and getting it move-in ready is a whole different reality than it was a short time ago. And if a tenant is willing to go through all of this, where are they going to find the space? Vacancy rates continue to hover around 4% nationwide, with many areas much lower than this. What about finding a different great corner space? That is nearly impossible. I don't know what the "hard corner" vacancy rate is, as it's not tracked, by I would guess it's well under 1%. So, a tenant would rather just bite the bullet and pay much more rent. The numbers, the risk, and the process make moving a non-starter in the vast majority of cases. So, a retail tenant that was perhaps making $180k will now live with $140k a year. Their other option is to close up shop and go to zero. But as landlords, we need to be very cautious. We are in the same boat as our tenants. If they succeed, we succeed. If they can't make it, we can't either. We need to ensure tenants have plenty of meat left on the bone, with a healthy buffer. That tenants that went from $180k to $140k a year can go to $40k a year pretty fast if consumer spending starts to take a real hit, or the unemployment rate rises. Yes, renewal rates are surprising us all. Yes, retail landlords have lots of leverage. But we need to think long-term. We are in the same team as our tenants. They're our partners in this. We can't forget that.
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Excellent insight...
I came here to nerd out on retail. So, here we go: Yes, the industry is absolutely seeing dramatic increases in tenant renewal rents. It's being experienced by landlords large and small, all across America. It's a function of lots of different things, but we need to be careful about how far tenants are stretched. Why are folks willing to pay so much to renew? Well, moving no longer makes much sense. What would have been a $300,000 restaurant buildout 5 years ago can now easily be over $500k-$600k. Tenants often obtain loans for these buildouts, and rates on those loans have skyrocketed. The permit that used to take 3 months to get can now commonly take 6-9 months, or more. Cities are moving much slower now than they did just a few years ago, and inspections are dragging on and on. There is a sticker shock element going on -- taking a vanilla shell space and getting it move-in ready is a whole different reality than it was a short time ago. And if a tenant is willing to go through all of this, where are they going to find the space? Vacancy rates continue to hover around 4% nationwide, with many areas much lower than this. What about finding a different great corner space? That is nearly impossible. I don't know what the "hard corner" vacancy rate is, as it's not tracked, by I would guess it's well under 1%. So, a tenant would rather just bite the bullet and pay much more rent. The numbers, the risk, and the process make moving a non-starter in the vast majority of cases. So, a retail tenant that was perhaps making $180k will now live with $140k a year. Their other option is to close up shop and go to zero. But as landlords, we need to be very cautious. We are in the same boat as our tenants. If they succeed, we succeed. If they can't make it, we can't either. We need to ensure tenants have plenty of meat left on the bone, with a healthy buffer. That tenants that went from $180k to $140k a year can go to $40k a year pretty fast if consumer spending starts to take a real hit, or the unemployment rate rises. Yes, renewal rates are surprising us all. Yes, retail landlords have lots of leverage. But we need to think long-term. We are in the same team as our tenants. They're our partners in this. We can't forget that.
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I help companies with site selection and lease negotiations .Commercial Real Estate expert . Exclusive tenant rep advisor ,national speaker/educator, investor , Greg@schenkcompany.com 614-496-2715 schenkcompany.com
What kind of renewal rates are you seeing in the retail area in your market?
I came here to nerd out on retail. So, here we go: Yes, the industry is absolutely seeing dramatic increases in tenant renewal rents. It's being experienced by landlords large and small, all across America. It's a function of lots of different things, but we need to be careful about how far tenants are stretched. Why are folks willing to pay so much to renew? Well, moving no longer makes much sense. What would have been a $300,000 restaurant buildout 5 years ago can now easily be over $500k-$600k. Tenants often obtain loans for these buildouts, and rates on those loans have skyrocketed. The permit that used to take 3 months to get can now commonly take 6-9 months, or more. Cities are moving much slower now than they did just a few years ago, and inspections are dragging on and on. There is a sticker shock element going on -- taking a vanilla shell space and getting it move-in ready is a whole different reality than it was a short time ago. And if a tenant is willing to go through all of this, where are they going to find the space? Vacancy rates continue to hover around 4% nationwide, with many areas much lower than this. What about finding a different great corner space? That is nearly impossible. I don't know what the "hard corner" vacancy rate is, as it's not tracked, by I would guess it's well under 1%. So, a tenant would rather just bite the bullet and pay much more rent. The numbers, the risk, and the process make moving a non-starter in the vast majority of cases. So, a retail tenant that was perhaps making $180k will now live with $140k a year. Their other option is to close up shop and go to zero. But as landlords, we need to be very cautious. We are in the same boat as our tenants. If they succeed, we succeed. If they can't make it, we can't either. We need to ensure tenants have plenty of meat left on the bone, with a healthy buffer. That tenants that went from $180k to $140k a year can go to $40k a year pretty fast if consumer spending starts to take a real hit, or the unemployment rate rises. Yes, renewal rates are surprising us all. Yes, retail landlords have lots of leverage. But we need to think long-term. We are in the same team as our tenants. They're our partners in this. We can't forget that.
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Leading Real Estate Leasing & Management Expert | Strategic Advisor for Family Offices & Investors | Driving Growth in Retail, Office & Industrial Property Investments
How to Win in the Big Box Retail Leasing Game Big box retail leasing is a complex and competitive process that requires a deep understanding of the tenant's business model, operational needs, customer base, and market dynamics. It also involves negotiating various aspects of the lease agreement, such as rent, term, tenant improvement allowance, co-tenancy clauses, exclusivity rights, and more. I have seen the challenges and opportunities that this sector of the real estate market presents, especially in the wake of the pandemic and the rise of e-commerce. Some of the benefits of big box retail leasing for landlords are: - Stable and long-term income stream from well-established and creditworthy tenants - High foot traffic and sales volume that can benefit other tenants in the same shopping center or area - Strong anchor effect that can enhance the visibility and attractiveness of the property Some of the challenges of big box retail leasing for landlords are: - High expectations and demands for the space from tenants, such as location, size, layout, parking, signage, etc. - A lot of bargaining power and leverage from tenants in the lease negotiations - Vulnerability to changing consumer preferences and behaviors, as well as competition from online platforms and other formats To succeed in big box retail leasing, both landlords and tenants need to adopt a strategic and proactive approach. Landlords need to identify and attract suitable big box tenants that can add value to their properties and portfolios. Tenants need to evaluate and select optimal locations that can maximize their market potential and customer reach. I have the knowledge and expertise to assist you with your big box retail leasing needs. Please contact me if you are interested in learning more or need help with finding or filling big box spaces in any market. #CommercialRealEstate #CommercialLeasing #MadisonProperties
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Lease rate escalation in shopping malls is important for several reasons: For landlords: Income protection: Escalation clauses protect landlords from inflation and rising operating costs. Over time, fixed rental rates lose value due to inflation, and escalation ensures landlords receive income that keeps pace with the rising cost of living. Market competitiveness: Escalation allows landlords to maintain their rental rates in line with the prevailing market rates. This is crucial for attracting and retaining top-tier tenants who demand prime locations and amenities. Predictable income: Fixed escalation rates provide landlords with predictable income streams, which helps with financial planning and investment decisions. For tenants: Stability and predictability: Escalation clauses provide tenants with clear and predictable rent increases, allowing them to budget and plan accordingly. This can be especially beneficial for long-term leases. Negotiation leverage: Tenants can use the potential for rent increases during lease renewal negotiations to secure lower initial rents or more favorable lease terms. Market reflection: Escalation based on market indices like CPI can ensure that tenants' rents remain fair and competitive within the mall. Overall, lease rate escalation benefits both landlords and tenants by: Maintaining the value of the shopping mall: Escalation ensures the mall remains financially viable and can continue to invest in its upkeep and amenities, benefitting all stakeholders. Promoting long-term relationships: Fair and predictable rent increases can foster long-term relationships between landlords and tenants, creating a stable and thriving shopping environment. Reflecting market dynamics: Escalation clauses linked to market metrics like CPI ensure rents remain competitive and reflect the changing economic landscape. It's important to note that the specific terms of a lease rate escalation clause can vary significantly, so it's crucial for both landlords and tenants to carefully review and understand the terms before signing a lease agreement.
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Outsourcing casual leasing, or the process of renting out temporary retail space within a shopping center, can provide several benefits for a center manager. Here are three reasons why a center manager may choose to outsource casual leasing: Access to a wider network of retailers: Using anyspaces.com, the centre manager can access our extensive network of over 15000 retailers and small businesses. By outsourcing casual leasing, center managers can leverage these networks to attract unique and diverse temporary tenants to the shopping center. This can enhance the overall tenant mix, create a more vibrant shopping environment, and potentially increase foot traffic and sales for both temporary and permanent tenants. Time and resource savings: Managing casual leasing in-house can be a time-consuming and resource-intensive task. It involves tasks such as prospecting, negotiating leases, and coordinating with temporary tenants. By outsourcing this function to a leasing agency, center managers can free up their time and resources to focus on core aspects of property management, such as tenant relations, maintenance, and marketing. This can lead to increased operational efficiency and cost savings in the long run. Flexibility and scalability: Outsourcing casual leasing allows center managers to scale their leasing efforts up or down based on seasonal demands, market conditions, or special events. In summary, outsourcing casual leasing can bring flexibility, efficiency, and a broader tenant network to a center manager's operations, ultimately leading to better leasing outcomes and overall success for the retail or commercial center. #centremanager #shoppingcentre #casualleasing #popupspace #popupshop #shoppingmall
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Exciting news in the retail industry. According to a recent report by Bisnow, leasing activity in shopping centers has hit its fastest pace in two decades. This momentum is reshaping retail landscapes and promising new opportunities for both landlords and investors. Learn more about what's driving this trend here: https://lnkd.in/eJneU8Cf #CommercialRealEstate #CRE #RealEstate #Investing #ShoppingCenters #RetailTrends
The Cost Seg Isaac Team at Madison Specs♦️$500,000,000+ ♦️ in deferred liabilities. Helping Real Estate owners pay ZERO taxes 💰💰 Capital Connecter/ Founder of the "Stage Debate" Podcast/ Real Estate Investor💸
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