The retail sector has been hit hard by the pandemic, forcing many tenants and landlords to rethink their lease agreements. How can you negotiate a fair and flexible deal for your retail space in this uncertain market? Here are some of the newest trends and innovations in lease negotiations for retail spaces that you should know about.
One of the most common requests from retail tenants is rent relief, which can take various forms depending on the situation. Some of the options include rent deferral, rent abatement, rent reduction, or rent restructuring. Rent deferral means postponing the payment of rent until a later date, usually with interest. Rent abatement means waiving the rent entirely for a certain period. Rent reduction means lowering the rent amount permanently or temporarily. Rent restructuring means changing the terms of the lease, such as the duration, the escalation rate, or the base rent.
Flexible Lease Terms: Businesses are increasingly seeking more flexible lease terms. This includes shorter lease durations and options for early termination. The demand for flexibility is a response to changing market conditions and uncertainties
In the ever-evolving landscape of retail, lease negotiations are adapting to new trends. Retailers now prioritize flexible lease terms, incorporating pop-up spaces and shorter commitments to navigate market uncertainties. Technology integration is also gaining traction, with smart retail spaces and data-driven insights shaping lease agreements. Sustainability is another key consideration, with a growing emphasis on eco-friendly practices and LEED-certified spaces. As a real estate professional, staying abreast of these trends is crucial for successful lease negotiations in the retail sector. #RetailLeasing #LeaseNegotiations #CommercialRealEstate #RetailTrends
When renting retail, there are real estate owners who fully equip the infrastructure of the property, which facilitates the rental process faster and at a reasonable price. These equipment include Internet services and the provision of large spaces as free services, for example, the use of halls and the provision of water and electricity. Among the retail leasing options, the person who owns the property can provide the tenant with A grace period that may extend to a full year without paying rent in exchange for obtaining tenants who pay rent on time and use long-term lease contracts...
Poner foco en la unidad de negocio donde hay que conseguir la reducción de renta, mediante los siguientes parámetros: Realizar market mapping de unos 500 a 1000 metros de la zona de influencia donde está ubicado nuestro local, para saber qué ingresos y qué alquiler está pagando cada una de las unidades de la competencia y así poder calcular la tasa de esfuerzo. Realizar un estudio de mercado de la misma zona de influencia, para saber el valor del metro cuadrado de nuestro local. Con estos datos ya se puede empezar la negociación con el arrendador, el análisis de los mismos, nos ayudará a ver si estamos por encima o por debajo del precio de mercado utilizándolo de estrategia en el mapa de negociación para obtener los resultados esperados.
Another trend that is gaining popularity among retail tenants and landlords is the percentage rent clause, which ties the rent amount to the sales performance of the tenant. This way, the rent fluctuates according to the market conditions and the tenant's profitability, creating a win-win situation for both parties. Percentage rent clauses can be structured in different ways, such as a fixed base rent plus a percentage of sales above a certain threshold, or a variable base rent that adjusts to the percentage of sales.
Bajo mi punto de vista, este tipo de renta variable es aplicable cuando tengamos claro como arrendatarios que la unidad de negocio productiva tiene un potencial de facturación elevado. Con esta herramienta somos capaces de mantener una tasa de esfuerzo razonable, siempre y cuando nuestro negocio obtenga los resultados más menos estimados en el business plan. Si creemos que podemos superar la estimación del Business Plan y tener una alta facturación, esto nos permitirá poder afrontar esa renta variable, ya que nuestro beneficio aguantará este gasto extra.
Co-tenancy clauses are provisions in the lease that allow the tenant to reduce the rent or terminate the lease if certain conditions are not met by the landlord or other tenants in the same shopping center. For example, a co-tenancy clause might state that the tenant can pay a lower rent if the anchor tenant or a certain percentage of the other tenants vacate the premises, or that the tenant can end the lease if the occupancy rate falls below a certain level. Co-tenancy clauses can help retail tenants mitigate the risk of losing foot traffic and sales due to the decline of the shopping center.
Si queremos utilizar el subarriendo para reducir los gastos de arrendamiento, alquilando parte de nuestro inmueble a un tercero, tenemos que tener presente y dejar muy claros ciertos parámetros que existirán en la convivencia de ambos dos modelos de negocio: 1. Obligaciones del superrendatario. 2. Como se divide el pago de la renta del inmueble. 3. Como se reparten los gastos de mantenimiento y reparaciones de las instalaciones. 4. Quien asume o como se reparten los gastos de suministros y servicios del inmueble. 5. Que limitaciones de uso puede tener el subarrentaraio. Y lo más importante, es tener presente que delante del arrendador, como arrendatarios tenemos el 100% de responsabilidad de nuestros actos y los del subarrendatario.
Tenant improvement allowances are funds provided by the landlord to the tenant for the purpose of renovating, upgrading, or customizing the retail space. Tenant improvement allowances can be a valuable incentive for retail tenants who want to create a unique and attractive store environment that reflects their brand identity and customer preferences. Tenant improvement allowances can be negotiated as part of the lease terms, and can vary depending on the size, location, and condition of the space, as well as the market demand and supply.
One thing I’ve found helpful that’s beneficial for both the landlord and prospective tenant is to offer creative ways to reduce rent and or deposit by permitting the tenant to make the improvements requested provided they are completed in a professional way with building codes in mind. This gives the space a fresh. Improved look. Makes tenant happy & Could offer the landlord opportunity with generous notice to show the space to prospective new tenants to other available spaces. This could be a win-win-win. For everyone .
One thing I’ve found helpful that’s beneficial for both the landlord and prospective tenant is to offer creative ways to reduce rent and or deposit by permitting the tenant to make the improvements requested provided they are completed in a professional way with building codes in mind. This gives the space a fresh. Improved look. Makes tenant happy & Could offer the landlord opportunity with generous notice to show the space to prospective new tenants to other available spaces. This could be a win-win-win. For everyone .
Flexible lease terms are another trend that is emerging in the retail sector, as both tenants and landlords seek more adaptability and agility in response to the changing consumer behavior and preferences. Flexible lease terms can include shorter lease durations, multiple renewal options, early termination rights, subleasing rights, or expansion rights. Flexible lease terms can benefit retail tenants who want to test new markets, formats, or concepts, or who want to avoid being locked into long-term commitments that might not suit their future needs.
Technology integration is a trend that is transforming the retail sector, as more tenants and landlords adopt digital tools and solutions to enhance their lease negotiations and management. Technology integration can include using online platforms, data analytics, artificial intelligence, or blockchain to streamline the lease process, improve communication, increase transparency, optimize performance, or reduce costs. Technology integration can also enable retail tenants and landlords to create more personalized and interactive experiences for their customers, such as virtual reality, augmented reality, or smart devices.
E-commerce and Omnichannel Retail: The rise of e-commerce has significantly impacted retail, with a trend towards omnichannel retail, integrating online, mobile, and in-store channels. This shift is opening new opportunities for retailers to reach customers through multiple platforms
Force Majeure clause for safeguarding retail outlets from major calamities and events like Covid has become an important addition.
Build Outs and Renovations: Negotiations around renovations and build-outs of commercial spaces are becoming a key part of lease discussions. Landlords and tenants are finding common ground, often sharing the costs and responsibilities of such renovations
The reuse of previous retail spaces is changing to non-traditional use. Think Pickle Ball. In the past, no such use would be easily considered by the landlord. This moves the property owner away from his comfort zone for the property to have a chance at resurgence.