The News: Store Closings Puts Disposition Experts in Spotlight
- Nov 25, 2008
Even in today’s harsh retail climate, at least one professional practice area is booming. Demand is growing for assistance in shedding unneeded space or negotiating more favorable lease terms. “We anticipate a 50 percent increase (in business) this year, and maybe a 100 percent increase next year,” reported Michael Wiener, president & CEO of Excess Space Retail Services Inc.The largest spike in requests for help from tenants comes from those industries that face the biggest challenges, such as banking, restaurants, and home furnishings. Wiener would not discuss specific examples of work that his firm is handling; however, according to the company’s Web site, Excess Space is representing such clients as The Home Depot Inc., Panera Bread Co., GE Capital Solutions Inc. and West Marine Inc.Most retailers have cut back on their expansion plans drastically. Prospective tenants can afford to be choosy. “They’re going to be cherry-picking,” said Ivan Friedman, president & CEO of RCS Real Estate Advisors, which advises clients on both space disposition and expansion needs. “The landlords are going to be sitting on the space for a while before they re-let.”Shuttering underperforming locations is a necessary strategy for many tenants seeking to stem losses, but Wiener reported that a growing number of retailers are seeking middle ground. For some underperforming stores that are on the bubble, lease restructuring is an attractive alternative to store closings. In such an agreement, landlords lower the rent, making it possible for tenants to stay in a location. In exchange, the retailer commits to a continuous operating guarantee that assures the landlord that the store will stay open for a specific term.That strategy can benefit both the retailer and the landlord. The retailer maintains its location rather than closing the store, and the landlord avoids lost revenue and the expense of backfilling the space.