Observations & Conversations
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Even if the real estate for a center is viable, you can't lease space if you don't bother to return phone calls. |
Summer is over
and it's time to get back to the grind of school and five-day (or more) work
weeks. Typically, summer is pretty quiet at our office. This year it just
whizzed by without giving us a chance for a breather (thank goodness business is
okay). The publishing arm, The Dealmakers, usually has difficulty finding news
during the month of August, but with the recent store closings of Phar-Mor, Ames
and Kmart, we've been busy finding replacement tenants for you.
There's a slew of local and regional supermarkets looking for second-generation
space, so if you've got a vacant anchor position, dig out the past six weeks of
The Dealmakers and I promise you'll find a few good leads. On the topic of
vacant anchor space, a landlord asked me to help market his 80% vacant center
with a dark Kmart. Of course, I was given a shoestring budget to be spent in the
most unresponsive time of the year. His marketing campaign consisted of a few
ads in The Dealmakers and a fax broadcast (faxed the leasing flier to 750
potential tenants - for info on a fax broadcast for your sites, send email to
fax@dealmakers.net). Lo and behold -
Boscov's, Dunhams and half a dozen other retailers called off the ads and faxes
expressing interest in the site. So the myth that anchors never initiate the
deal is totally dispelled and even though we’re in a bumpy economy retailers are
still expanding.
In conversations with owners and tenants, I keep on hearing about problems with
subleasing space. Seems as though more often than not, the first set of figures
on rent and basic business terms provided is a lot different from reality. For
instance, a potential subtenant is told there’s nine years left on the primary
term with four five-year options. In reality it has five years left and one
five-year option. The rent is quoted as $6 psf, but in the lease it’s $7 psf and
the extras are wrong too. The misinformation is creating a lot of frustration
and requiring deals to be negotiated twice. Another big bone of contention on
the subleasing front is the handling of options, especially when the original
tenant is subsidizing the rent or the sublessee doesn’t have a stellar financial
statement. It’s a question of risk or reward that retailers are having trouble
figuring out; do they stay on the hook for the long haul, try to buy themselves
out of the lease with the landlord or just eat the cost of a vacant store for a
few more years? How many of these retailers can continue to afford to pay rent
on nonperforming sites is an even better question, but we’ll know when they
start disavowing leases with the bankruptcy judge, everyone loses.
We've also been on a major push to add more retailers to our database of 6,500
chains. Just in the month of August, we spoke with 200 retailers looking for
sites that we hadn't talked to in our 23-year history. (For a free demo of our
on-line database, TenantSearch, go to
http://tenantsearchontheweb.property.com/ While on the topic of TenantSearch,
our computer programming gurus are building a system that when you subscribe to
our on-line service, you’ll get an email alert every time we get the expansion
needs of a retailer looking for space in the area where you’re trying to find a
tenant. It will be a month before it’s executed, but I’ll let you know when its
ready ) Talking to thousands of retailers gives a us good barometer on how the
industry is doing as a whole, regionally, what kind of uses are doing well and
who's consolidating. To sum up the summer, the retailers we spoke to in the last
few months think things look fine and that the end of the world or the stock
market is far from imminent (but they’re not jumping for joy either).
Another summertime task at our office, in the brokerage arm, was taking on the
leasing of a portfolio of centers that desperately needed some tender loving
care. Ted handed me a list of the last leasing guy's notes and said call
everybody that left a message about leasing space in the centers and let me know
who's interested. I started with the notes from June through August and talked
to enough owners of pizzerias, laundry mats, dry cleaners and nail salons to
fill all of the centers. Unfortunately they all already have these uses in the
tenant mix. My point is that no one returned any of the calls. It just proves
that even if the real estate for a center is viable, you can't lease space if
you don't bother to return phone calls.
The feature article in this issue is on Kids City. Their first U.S. venture will
debut at the Palisades Center in New York and the company plans a national
roll-out, so be sure to read the article. It could be a great lead for you. The
concept has been operating in Mexico for a few years and is a kid-size model of
a town where children can pretend they are grown ups and do the stuff like buy
groceries or put gas in the car. The projected admission price for the U.S. unit
is $25 a head, which sounds steep to me, but according to my son I’m the most
frugal woman alive (he doesn’t put it so diplomatically especially when he took
my charge card and was unmerciful in his back-to-school shopping). I’d bet that
the tenant improvement allowance for a Kids City is huge, but they give the
impression that the concept could really make a statement and draw a big
customer base, since I’m sure there are a lot of parents that are willing to
show their kid a good time even if it costs more than they want to spend.
Another interesting new retail concept we found is The Shoppe at Planned
Parenthood (part of the Planned Parenthood organization). The store is
tastefully merchandised, however I’m not sure I would want to be a landlord with
picketing in front of my center but the rent check helps pays the mortgage.
As I'm writing this column, we're preparing for the ICSC Pennsylvania, New
Jersey and Delaware Dealmaking show in Philly. Last year's show was a bust,
because most of us were in shock about the September 11th attacks. Hopefully
this year's show will be quiet on the home front, but active in the convention
hall. Stop by our booth in Philly and say hello.
Until next month,
Ann O’Neal, Publisher