Win-Win Rent Relief

DISCUSSION TOPIC

Retailers Seek Rent Cuts 3/11/09

TOPIC SUMMARY:

Sleepy’s: the Mattress Professionals recently sent out a letter to its 700 landlords across the East Coast requesting a whopping 25 percent reduction in its rent payments. The request comes as many stores across the country are also asking for and apparently getting rent concessions from landlords to help deal with the downturn.

Several landlords in the New York Tri-State area that confirmed receiving the letter said they rejected the rent-reduction proposal.

But an article in The Dallas Morning News finds that retailers outside New York City are winning concessions as landlords look to avoid dealing with empty space in a tough market. Tenants are getting free rent, downsizing their space, renegotiating lease terms and receiving more tenant improvement allowances. In some cases, leases are being renewed earlier and for longer periods at better terms.

Discussion questions:  Should all retailers expect to be able to negotiate rent cuts this year? How might the pressure for large-scale rent reductions affect shopping center operators?

My post: 

Unfortunately many (most?) retailer-landlord relationships are adversarial which only creates lose-lose negotiation results.  The forward-thinking retailers and landlords have proactively reached out to each other to discuss how to weather this storm together.  Rent reductions must be considered on a case by case basis, taking into account the trends in traffic and spending.  A typical win-win result is a temporary reduction in rents tied to traffic and spending trends with key milestone dates for review.  It is reasonable for the retailer to request temporary relief while traffic and spending remain tough.  It is also reasonable for the landlord to see the retailer’s financials to verify the situation.

The message is to aggressively negotiate in a manner that ensures the relationship is solid for the long term benefit of both landlord and retailer.

Mike Osorio, your Dare to be Contagious! TM strategist

www.OsorioGroup.com

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Go to the full discussion at RetailWire.com:
http://www.retailwire.com/Discussions/Sngl_Discussion.cfm/13605

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One Response to Win-Win Rent Relief

  1. Yes sir, In the Washington/Baltimore area, many landlords lowered the rent for Sleepy’s so good old Harry can keep his yacht & mansion in fine shape!!!

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