Posted on 07/26/2009 12:53:17 PM PDT by george76
When big-box retailers close, other tenants look to shift or end leases.
Vacant big-box retail space in shopping centers throughout metro Denver has left many neighboring retailers combing through their leases and looking for a way out.
Many retail leases contain provisions known as "co-tenancy" clauses. The clauses take many forms, with some requiring a certain percentage of a shopping center to be leased and others naming specific retailers or categories that must remain open.
If the conditions aren't met, the remaining tenants in a center can demand rent reductions or leave altogether. In other cases, tenants who are preparing to open can back out of a center if their promised neighbors fail to materialize.
"The relationship among retailers is synergistic — they depend on each other to generate sales," .
The advent of "power" shopping centers in the 1980s led to the inclusion of co-tenancy clauses in leases, when national retailers realized that there was strength in locating near one another. Now, the bankruptcies of national big-box chains such as Circuit City and Linens 'N Things have led to a spike in retail vacancies, causing the co-tenancy clauses to kick in.
Most developers aren't willing to discuss co-tenancy clauses except in general terms because they don't want tenants to demand concessions.
"When your leg gets chopped off, the tenant wants the right to chop the other leg off," he said. "It's a bad deal."
(Excerpt) Read more at denverpost.com ...
Who knew? or cares?
The smaller ones had a number of stores in the strip that pulled in traffic from Wal-Mart shoppers.
When Wal-Mart opened the Supper Wal-Mart up the road a bit half the stores in the old location folded.
Interesting. This is the exact opposite of the myth which says WalMart is supposed to kill off Ma/Pa stores. In reality, the Wally supercenter is usually the center of a shopping area and customers come to Wallies to buy staples and then still have money in their pockets and spread out. In reality, every little Ma/Pa store wants to be right next to Wallies.
Those ‘co-tenancy’ deals can work another way too - keeping things out of space they’d like to be in.
My employer would have liked to have been in a strip-mall adjacent to a Big-box - however, one of the strip’s tenants had exclusivity clauses as to what could go in - and NOT go in. Employer now getting into the vicinity of the Big-box with space in a building owned by a developer other than the one with all the restrictive tenancy deals.
The next shoe is dropping.
The leases also usually have a clause where the landlord gets a cut or percentage of sales including any sales growth.
The Hope & Change economy is killing everyone.
Grandma and Grandpa will literally be done away with under O’s DeathCare plan.
Many lawsuits on this. Now, tenants are using anchor shutdowns as an excuse for breaking leases and pulling out of shopping centers. Then the SC owner defaults on their commercial mortgage.
We are on the downside of a commercial bubble too. Too much building on the upside.
The problem, again, was too cheap credit and too low downpayments. And non-recourse should end!!!!!!!!!!!!!!!!!!!!
That hopey changey thing at work.
I agree.
In Vancouver, there are avenue/blvd’s with LOTS of strip malls where anyone driving to the BIG MALL will pass them and will see their signs. Unless one is certain that what they need is IN the mall, the small biz will not get their $$$ but that’s still the best advertisement to remind them if they dont find what they are looking for in the mall, they can head back.
-probably the only advantage for the super malls is parking while strip mall parking are at a premium.
Walmart can be a large magnet for smaller stores.
Most people don’t realize how expensive commerical real estate leases are and how counter productive they are to surival of malls and strip malls.
Landords WERE charging CAM fees, advertising fees, water sewer, security, trash removal, a percentage of our GROSS earnings (not net - you had to provide your tax forms) in addition to your RENT.
Now wonder you see so many (50% vacancy) empty stores these days.
Greed killed the Golden Goose by destroying any profit for small businesses.
That hopey changey thing at work.
What could go wrong ?
/s
But WalMart still kills stores especially when the economic pie is shrinking with our contracting economy. It always has killed the small guy. Even more so now. It has gutted many main streets in small towns. I shop WalMart sometimes but I know the score.
Maybe someone can tell me how restaurants open and close with impunity. What happens to the lease they have broken by going out of business?
My theory is that restaurants are mostly incorporated so the owner is never personally liable for debts and leases. Or he is just minimally liable. So he goes under and opens up a new Chinese restaurant five miles down the road. As long as he can get suppliers to sell him stuff he is golden
and the shoe is knocking out small business even more than the obamantion has been able to do so far.
Thanks for the ping, george!
Or if it a chain, the franchisee is on the lease, so if the local Big Burger goes out of business, Big Burger Inc. isn't on the hook but rather some poor schmuck who is now bankrupt himself for losing his business.
I prefer the strip malls where you can pull up in front of a store and go shop instead of wandering through the mall. Target saw the benefit of being with a bunch of smaller stores and it has paid off for them.
LLC is another way to go.
Often the lease is also signed personally ( which is nice for the landlord ).
Lawsuits can follow broken leases, unpaid bills as to tenant finishes... and tenant walk outs. Getting the money for lost rents is a different problem even with a legal judgement.
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