Anyone who has taken a road trip with kids knows the hounding question “Are we there yet?” This economy has many of us asking the same question. Are we there yet? When will recovery arrive? This is a long journey, but the road signs help us to know where we are and how long it will take to get there.

 

During the course of this road trip, owners with vacancies should evaluate how long a space might remain vacant. This can assist in assessing offers to lease a space that might come in along the way albeit at lower rental rates than have been seen in the past. Understanding the time value of money can assist owners in determining at what point is it wise to lower the rent and take a tenant today versus losing rent on the property over a longer term. Aggressive leasing in the short term, at rates that might be lower than desired can help keep centers alive. This will raise occupancy levels and help to create traffic flow.

 

Another common sign during a recession are tenants who ask for rent relief. Before considering such a request, landlords should obtain sales history and marketing plans from those tenants. Retailers should scrutinize their business and determine how they are doing in meeting their customers’ needs and satisfying those customers with attractive price points, quality products and the value they receive from the retailer.

 

Ownership entities should also take a tenant’s marketing strategy into consideration. Are your tenants marketing programs professional in appearance? Are they advertising to the local community? Some businesses could consider offering a daily or weekly special to help bring customers into their store especially on days when business is known to be slow. Others, like restaurants, may partner with local schools, scout troops, youth groups and others, offering a share of their daily revenue to these local groups drives sales, increases traffic and raises awareness for the retailers that create these relationships. If tenants aren’t working hard on coming up with ideas to help their business thrive during the recession, they should not expect the landlord to reduce rents in an effort to assist them. They must first help themselves.

 

If a landlord would choose to reduce rental rates for a tenant over the short term, safety nets can be put in place to assist the landlord in recovering value over the longer term. A right for the landlord to terminate the lease if the tenant’s sales don’t improve could allow the landlord to accept a new tenant for the space at a higher rental rate down the road. Or a reduction in rent could be structured stair-step style and combined with an extension of the lease. These options and others like them help to preserve the value of a property while at the same time assisting tenants. There is no doubt; we are driving down a road where tenant retention should be a priority for all landlords.

 

Regardless of your retail center’s current status, you need to have a good road map. Merchandising your center is of upmost importance. Determining uses that are missing within neighborhoods is a valuable tool for shopping center owners with vacancies to be filled. A variety of uses within any given center creates cross shopping opportunities for the customers and keeps a center active.

 

Nationally, retail sales are trending downward and have been for months now. This downward trend is becoming increasingly less negative each month leading analysts to predict that we’ll start seeing increases in sales again later this year. While it’s certainly a tough time for most retailers, we are seeing some movement among local and regional tenants. National tenants are moving at a slower pace but they too are still active.

While our retail leasing activity is up in the second quarter we still have many miles to travel before reaching the destination: Recovery. Targeting and prospecting for new or replacement tenants is the job of one of our knowledgeable professionals. We provide a full assessment of each of property we represent. We’ll check the roadmap along the way and make sure we stay on track to arrive at the destination in the shortest time possible. Contact a Block Real Estate Services retail specialist today to begin the recovery of your retail holdings.