March 06, 2015
Source: ICSC News/Press
Reconfiguring a vacant store is often the key to leasing it, panelists said at an SCTLive event in Miami this week titled “Solutions for Hard-to-Fill Spaces.” Retailer prototypes are shrinking, making large spaces unsuitable for many of the types of chains that are now expanding, the participants were saying.
The old supermarket model that required 50,000 square feet does not work anymore, as most grocers are learning to operate in much smaller spaces. “Does the physical plan work? If not, change it,” said Paul Rutledge, CRX, CSM, CLS, first vice president for the Tampa Bay market at CBRE. “Bulldozers are not bad.” Rutledge recommended scrapping excess vacant in-line space and creating new outparcels. Food tenants and other expanding chains, such as Dollar Tree, are increasingly requesting outparcels, he said.
Splitting a large space into front and back units can help, with the front space leased to a retailer and the rear leased to an office or some other nonretail use, suggested Linda Dougherty, CRX, CSM, CMD, CLS, executive vice president of real estate development at the Orlando, Fla.–based Dougherty Group. “We gave the rear of a large space to a maid service with an entrance onto the back parking lot,” she said. And this, she added, left a smaller, shallower space with more frontage that was easier to lease to a retailer.
When money is tight, matching a space’s quirks to a specific tenant’s business can help fill the space. Triangle-shaped stores, for example, are less conducive to traditional store fixtures, so they are more suitable for restaurants and destination uses such as beauty schools, said John Breder, CSM, CLS, CRX, owner and president of the Miami-based Breder Cos.
Leasing agents should also seek out international and ethnic retailers to occupy tough-to-fill spaces, Rutledge suggested. “Internationals don’t see the world as we see it,” he said. “In Miami we’ve put retailers in places you’d need to have a map to get to.” Such tenants are not only willing to take chances on unconventional spaces, they are also strong operators that help differentiate a center, he said. Tenants that serve booming ethnic groups are good target tenants too, Dougherty said, pointing out that Orlando retailers are scrambling to serve a growing community of Brazilians with second homes in the city. Robert Breslau, chief development officer at Stiles, suggested maintaining ties with local residential brokers to stay on top of changing demographics in surrounding neighborhoods.
The panel pegged a few tenant categories as sure signs of a dying retail property: unemployment offices, bingo parlors and DMV offices. Churches, too, were unpopular with the panel. “Try evicting a church if it stops paying rent,” Rutledge quipped.
Perhaps the most important solution for a hard-to-fill space is a tenacious and well-incentivized leasing agent, panelists said. Greg Sembler, chairman of The Sembler Co., said he often puts new agents on hard-to-lease cases because they are willing to make more calls and put in more legwork than more-established agents. Panelists also recommended paying a broker more per square foot for troubled space and bringing in college students to help canvass.
Additionally, prevention is better than a cure, Breslau noted. “You need to keep these anchors from going empty in the first place,” he said, by staying on top of anchor prototypes and identifying tenants that might be candidates for downsizing before they actually do downsize.