Tenant incentives are sweeping the retail world as landlords are offering even more to get to ‘yes’
Fitness-related retailers, like Lululemon are desired tenants in today’s retail climate now that store closings have rocked the industry
Some of the recent statistics on retail leasing across the U.S. might sound a bit contradictory. Rents in many major markets nationally are still strong and in some cities, such as San Francisco, breaking records. At the same time, a record number of retail outlets shuttered in 2016, and a number of national legacy brands — bedrock American companies from Kmart to Sears — have closed a slew of stores and/or filed for bankruptcy protection.
With this kind of uncertainty in the retail world, landlords are increasingly turning to incentives to sweeten deals for cautious retailers, even on High Street strips. Lucrative incentive deals may include a period of lower rent at the start of the lease term, huge contributions to the tenant build-out and, sometimes, lower rent for the entire period in exchange for a percentage of total revenue.
Incentives are nothing new, but “the race to incentivize is more than we’ve seen in the last five years on Fifth Avenue in New York,” said Naveen Jaggi, president of retail brokerage at JLL. For luxury retail in other major metropolitan areas, he said, landlords are “incentivizing, but not on the same level as in New York.”
Until very recently, retail on High Streets had generally performed well since the darkest days of the recession, with rents hitting records in the last five years in many of top shopping corridors nationally — Chicago’s Michigan Avenue, New York’s Fifth Avenue and Rodeo Drive in Beverly Hills. But since the recovery, consumer preferences have shifted and occupancy costs have gotten higher. Retailers are making do with less space, including sometimes having only a showroom-type space, even for clothing or shoes.
Taking rents are now hovering around 15 percent below asking, one prominent retail broker who asked not to be named said. And in some areas, including Manhattan, asking rents are already falling.
Faith Hope Consolo, a retail broker with Douglas Elliman, said the tide has definitively turned in 新上海贵族宝贝论坛