May 14, 2019
A shopper-led retail revolution is forcing tenants and landlords to accommodate rapidly changing consumer demands. Enhanced store layouts, property amenities and technology integration are among the major points being discussed during lease renewal negotiations these days.
Coreland Companies’ Kindy Hohman shares insights into secrets she’s learned about how to navigate the myriad of tenant demands for retail owners and managers. Check out her thoughts below in our latest 3 CRE Q&A.
Q: What are some of today’s most common requests from tenants in renewal negotiations?
A: Requests for higher tenant improvement allocations tops the list. Across the board, retailers and restaurants are pushing for contributions to facilitate upgrades to meet changing demands. These may include elements like enhanced outdoor spaces and rapid pick-up accommodations. How much a landlord should provide is subjective. It depends on a tenant’s ability to generate additional traffic for the shopping center. If it makes them a better draw, then the landlord is willing to offer more.
Security has also been a major point of discussion. Most shopping centers have had to enhance security measures over the last 10 years. The irony is that they are demanding enhanced security while also wanting to negotiate CAM caps due to escalating expenses over the last decade.
Q: How do you know where to draw the line with national or regional tenants?
A: You evaluate each situation with the data you have. Monthly sales reporting provides valuable insight. You evaluate the tenant’s history, longevity, growth potential, and its ability to attract a wider base of consumers.
Fifteen years ago more concessions were made for national tenants. However, today your stronger tenant is often your local or regional tenant such as a local favorite QSR, versus a chain restaurant. If the tenant draws new customers and creates synergy, then it is worth an investment.
Q: What are some of the more significant tenant enhancements being made?
A: Based on the tenants within our management portfolio, larger retailers are focusing their efforts on floor plans and layouts. Some are adopting the Apple mindset and integrating experiential elements, such as Dick’s Sporting Goods’ batting cages and spotlight exhibits.
Smaller retailers and QSRs are focused on branding elements such as prominent, unique signage. Others are focused on enhancing outdoor space by expanding patios and improving décor. To accommodate various delivery options, designated parking stalls have also become a popular request.
*Pictured Edinger Plaza Stacked
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