Tracey Hatley: How Shopping Centers Can Scare Up Good Returns from Ghost Space

Halloween comes only once a year, much to the disappointment of costumed, candy-hoarding kids — and much to the relief of their parents. For years, retailers and mall owners would’ve largely sided with the kids: Halloween brings increased sales, but only for one month a year and only for certain kinds of shops.

These days, however, the retail sector is embracing the business version of a sugar high: using temporary leases to lure pop-up Halloween shops that open between September and November. Far from fly-by-night operations, these short-lived stores are a big reason why Halloween spending is expected to hit approximately $11.3 billion this year. And with more than 90 percent of households doing their costume shopping at brick-and-mortar stores, temporary leases present a scary good revenue opportunity for retail real estate owners.

The temporary-lease trend has blossomed, and there are three reasons shopping-center owners should embrace pop-up retailers:

  1. Supercharge Shuttered Space: National retailers often have co-tenancy or occupancy provisions, or both, in their leases, permitting them to halt operations or decrease their rent if the shopping center falls below agreed sales thresholds. When struggling centers lose these tenants, they can stem the bleeding by turning to specialty retailers like Spirit Halloween, which operates 1,100 temporary stores in North America from around Labor Day through October. Backfilling unsightly, empty storefronts, even for two or three months, can enhance the center’s net operating income and increase occupancy during the term.
  2. Achieve Premium Pricing: With the Halloween pop-up’s short shelf-life, the typical real estate elements of location and timing are even more critical to their success than normal. Temporary Halloween retailers look for prime spaces, and will typically pay premium rents in what is generally a slow season for retail.
  3. Keep Customers Coming Back: Eight out of ten U.S. households plan to spend as much at Halloween as they did last year, and one of five plans to spend more, according to ICSC. Pop-up shops are destination concepts that help shopping centers capture some of that demand, creating an opportunity to lure in new clientele and convert seasonal shoppers into regulars. Halloween isn’t just for kids, and shopping center owners who push center-wide promotions and amenities, combined with social media aimed at adult buyers, can lure some of those shoppers back during the holidays.

“Halloween has continued to grow in importance over the past several years and consumer demand has driven retailers to place greater emphasis on the holiday,” says Jesse Tron, spokesperson for ICSC. “The fact that consumers are willing to spend more on discretionary purchases is a positive sign for the upcoming holiday shopping season.”

Tracey Hatley is Director of Specialty Leasing for JLL Retail.