Leasing and managing more than 10 million square feet provides us a unique perspective on trends and common issues specific to Southern California retail. Each quarter we present the numbers through our Quarterly Retail Roundup, and in 2015 we will consult our ‘boots-on-the-ground’ to share what they are seeing in the marketplace. This quarter we asked Regional Real Estate Manager Dinny Shryock and Senior Associate Retail Broker Ben Terry, “What’s the buzz on retail… from ground level?”
Dinny Shryock, Regional Real Estate Manager
We have seen a huge increase in business sales resulting in more lease assignments, most notably following a successful renewal. It seems that the improved economy has not only benefited commercial real estate sales, but also the sales of independent businesses and franchises. There is a competitive market out there for these businesses, and retailers, especially those that fought through the recession, are taking advantage of the improved business climate.
As a result, owners are taking on additional risk and should take steps to protect themselves with a new and unknown entity. During the renewal process we are advising our clients to add an additional security deposit or collect 2-3 months payment in advance from the new lessee if the lease were to be assigned. Owners can also increase the lease assignment fee or consider adding an additional fee to cover the cost of legal review. In addition, it is important to have a complete financial submittal package and business plan in place to properly vet new ownership.
Ben Terry, Senior Associate, Retail Brokerage
One of the common themes we’ve been working through is how to get beyond lease restrictions. In the past, anchor tenant leases typically had restrictions against gyms, medical, massage and restaurants because of parking concerns or the perception that it would have a negative effect on their business. But it is a different market today and tenants are much more likely see the value of these co-tenants.
Even beyond anchor tenants, proactively dealing with parking variances can greatly enhance leasing efforts. One of our clients proactively secured a parking variance for a neighborhood shopping center before we aggressively went out to market. Knowing that the most viable candidates for the center were gyms and restaurants, the variance allowed us to secure strong, regional retailers and execute leases without any pesky contingency periods.