Monday, February 2, 2009

Is There a Silver Lining for Retailers in this Recession?

Shrinking customer spending is hurting retailers everywhere. For commercial district managers interested in helping retailers through these difficult times, finding a way to help is at the top of their 'to do' list.

A few recent articles in the NYTimes got me thinking, is there a potential silver lining to this recession for retailers? While sales may be falling, the silver lining is that occupany costs (i.e. rent - which for most retailers should be between 8-12% of gross sales) are on the decline in many markets as well. That is because as some businesses close shop or consolidate, landlords are more and more willing to lease on more attractive terms just to fill their spaces. Keep in mind that this tactic works best with owners who have owned their buildings for awhile, and therefore have lower debt service payments than a recent owner who bought at the height of the market. (See NYTimes article: "Recession Has Landlords of Retail Tenants Extending Discounts of Their Own" .) And for businesses with the capital and ability to sign long-term leases (see the NYTimes article: "Putting Capital at the Top of the Menu") there are opportunities for unique spaces at prices that would not have been available before the downtown.

So if you've got a business whose lease is ending, consider helping them renegotiate their lease or helping them move to a space that may be more suitable and maybe even more productive for them in the end.

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