"When You Lease, Buy, Manage or Sell
Real Estate"
Gorman Real Estate Associates, Inc.
Licensed Real Estate Company in Georgia
Johnson Gorman
Licensed Real Estate Broker
Georgia & Florida
6102 Menlow Court
Atlanta, Georgia 30041
Georgia or Florida
e-mail:
Broker@gormanassoc.com
Other States
e-mail:
Consultant@gormanassoc.com
Distressed Retail and Shopping Center
Leasing
Links to subjects:
…these business categories are under stress…
…might salvage our properties…
…still hang on to false values or refuse to be
realistic…
…we have completely lost sight of what in the past made
it all work, the retailer…
…We have driven the small retailer out of our centers…
…why our retail centers and shops are no longer unique
and exciting…
…a significant amount of time before existing retailers
will venture to grow and expand…
…novice tenant has always been the most volatile…
…the first step is to get realistic and replace that
$20.00 +/- sq. ft. rent…
…Short term leases of say a year…
…they have been put on notice that there were other
options…
…improving retail and not in preparation to flip…
…Tenant evaluation will be critical…
…a pet store requires 50,000 customers to support it…
…all will affect possible outcomes…
…these business categories are under stress…
Perhaps you reached this website because you were interested in one of
the subjects noted below that relate to various aspects of retail and
shopping centers and the fact that these business categories are under
stress in this present economic environment.
…might salvage our properties…
I have some thoughts on how some of these properties might be guided back on track even
in these trying times. I
have worked with retailers and shopping centers for many
years. You can review the bio page
for information on my experience.
…still hang on to false values or refuse to be realistic…
Many still hang on to false values or refuse to be
realistic about the situation they find ourselves in relative to a loan
portfolio, their investment or a property they manage.
Without being realistic, my thoughts
will not apply to many situations and may not work at
all for some. Degree of
distress, location, population, desirability, competition, proximity of
competing properties, attitude of local authorities, etc. all will effect
possible outcomes. Returning to the basics
should be a consideration.
…we have lost sight of what in the past made
it all work,
the retailer…
While watching developers, investors, lenders, owners, managers and
related real estate services for years, it appears that we have lost sight of what in the past made it all work, the
retailer. Not just the
retailer but successful retailers.
We focused on flipping centers and raising rent rolls to
increase values without regard for the “Goose that laid the
golden egg”, the retailer.
…We have driven the small retailer out of our centers…
We have driven the small retailer out of our centers by raising the
rents above what allows their businesses to be profitable.
The result has been the loss of unique merchandising and the
personality, care and level of service an individual owner enjoys giving
to their customer. Their customer, not the mall's or the strip center's customer.
…why our retail centers and shops are no longer unique
and exciting…
We wonder why our retail centers and shops are no longer unique and
exciting. We think more
lavish designs (Usually architectural and not more retail tailored) will
give us a product that will attract customers and thus retailers.
Customer attraction is created by individual shop owners who have a passion for
exciting retail, personable service, unique merchandise presentations,
creative ideas and a desire less restrictive design criteria and on and on.
Think for a moment the about the fun, interest and excitement you find
in many resort areas. There you find the entrepreneurial retailer
who opens in any nook and cranny available and offers a fun place to
shop. They don't need and most often don't want a "Center" for
their shop location.
The key is the retailer and to attract those retailers to our centers in
sufficient quantities to allow us to start with a modest cash flow allowing
us to begin our recovery. We will
need to consider a mixed use in some cases understanding local
authorities will need to be more flexible at least for the present.
You must adjust your values
and rents to attract tenants allowing them to survive and thrive.
…a significant amount of time before existing retailers
will venture to grow and expand…
I believe there will be a significant amount of time before existing
retailers will venture to grow and expand.
You must search for and help create new retailers, or tenants
of any kind as long as you stay within the zoning laws.
For example, the proverbial “Person who always wanted a shop”.
Or a mini storage facility or the smaller office tenant who might
need more exposure, or even some of the smaller industrial type tenants
that require less storage.
You are going to have to be creative and open minded to start a
turn around. You might even want
to temporarily refer to some properties as a “Business Center".
…novice tenant has always been the most volatile…
The novice tenant has always been the most volatile of all possible
tenants and has usually been avoided.
Some might have rented to them just to pay the mortgage
temporarily feeling they would not remain very long anyway.
More rent may have been charged because of the credit risk and
little or nothing was done to help them succeed.
On top of base rents many added large CAM, Advertising, Management,
Association, Maintenance, Leasing, etc. fees which may have also
included an additional souse of income which added an additional burden on
the tenant.
…the first step is to get realistic and replace that
$20.00 +/- sq. ft. rent…
To prepare yourself to move forward, the first step is to be realistic
and replace that $20.00 +/- sq. ft. rent with … say $8.00 (Or something
similar but just as drastic). Proportionate CAM, Advertising,
Management, Association, Maintenance, Leasing, etc. fees
should be used. Short term leases would allow slow but incremental
increases gradually rebuilding value.
For many years people have been leaving the work force voluntarily or in
some cases have been forced to retire early.
Others who retired and had nice incomes based on their
investments now find themselves needing to create additional income.
It is unlikely that most will find jobs and therefore starting a
business will be a likely result.
Short term leases of a year with the tenant knowing that at the end
of a year they can either leave or if they stay there will be a modest rent increase.
A
sincerely modest
increase to build trust and to recognize that the purpose is to build a
healthy cash flow for the health of all and not to flip and sell again
where the tenant who helped restore the center to health will be tossed
out. After the first year,
possibly another 1 year lease with similar terms.
…they have been put on notice that there were other
options…
Existing tenants may need to be offered the same rent and revised term.
If they want their present lease term and options, etc. to remain
in force then they will be allowed to continue but they have been put on
notice that there were other options available to them.
…improving retail and not in preparation to flip…
Fairness and trust must be a part of any relationship.
Take an active role in promoting the center for improving
retail and not in preparation to flip.
The ultimate tenant mix will be important for all and can be
adjusted as time Passes.
…Tenant evaluation will be critical…
Tenant evaluation will be critical as to knowledge, funding, experience,
business plan, credit rating, past history, goals, lease restrictions as
to merchandise so as not to deliberately infringe on other tenants (This
could be spelled out and tied to a percentage of certain kinds of
merchandise).
You might want to do like a food franchise and require that the
owner work in the shop and not have any absentee ownership (Exceptions
could be made where there is a second location for an already successful
business). A leasing agent or consultant with a broad knowledge of
retail operations and merchandising will be invaluable.
…a pet store requires 50,000 customers to support it…
You would do nothing to libel yourself (Spell it out that any help is
only ministerial and not met to encourage or involve you in any way with
any business decision). I
don’t know the present day numbers, but the fact that maybe a pet
store requires 50,000 customers to support it while a grocery store
might only require 4,000 homes.
…all will affect possible outcomes…
Again, degree of distress, location, population, desirability, etc. all
will affect possible outcomes and even if this approach will work for
any one center.
.....How can we help?........
In most cases a lender who has a developer/owner on a loan and the developer/owner has assets, the lender will not interfere. They will leave it up to the developer/owner to pay the notes and remain responsible for leasing. Where we can be of service is where a lender has recovered a property and has no alternative but to market the property themselves. If this is your situation, give me a call.
"When You Lease, Buy, Manage or Sell Real Estate"
Gorman Real Estate
Associates, Inc.
Licensed Real Estate Company in Georgia
Johnson Gorman
Licensed Real Estate Broker
Georgia & Florida
6102 Menlow Court
Atlanta, Georgia 30041
770-205-8435
Georgia or Florida
e-mail: Broker@gormanassoc.com
Other States
e-mail: Consultant@gormanassoc.com
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