MIAMI—When it comes to retail leasing, one strategy does not fit all deals. GlobeSt.com caught up with Jerry Welkis, president of Welco Realty and X Team International partner, to get his take on what works when and why in part two of this exclusive three-part interview.
Welco has represented the likes of AMC Theaters, Marshalls, Toys ‘R Us, Party City, and Dress Barn. You can go back and read part one of this interview, “Five Retail Leasing Trends You Need to Know,” if you missed it.
GlobeSt.com: Is there a one-size fits all strategy for handling retail real estate leasing transactions or does the strategy vary widely based on the market and the landlord and the tenant? What factors influence your strategy?
Welkis: There is no one size fits all strategy. The approach to each tenant is different based on the shopping center location, tenant size, and whether the tenant is an anchor or in-line tenant.
Typically, with an anchor tenant you would get a longer term commitment for your financing needs and you would have to provide more to the tenant in the way of tenant improvement allowances and incentives. Depending upon the location, if there is a shopping center that is in severe need of re-tenanting, you obviously have to get aggressive on the type of deal structure to get the tenants interested and willing to come in.
In some cases, percentage rent deals may be offered to prove to the tenant that they can do the business in the shopping center. Once they establish a certain sales base, the landlord will typically convert the percentage rent to a fixed rent. This way the tenant is protected on its downside and if the landlord can prove that the tenant can do the sales, they may actually be able to get more rent per square foot than if a fixed rent at a lower number had been offered initially.
GlobeSt.com: How do you approach retail real estate leasing transactions? And is it any different than how other firms approach it?
Welkis: Whether we are representing the tenant or landlord, we feel it is very important to do our due diligence. When we represent a tenant, we do a full evaluation of the market to include demographics, competition, site selection criteria, market rents, and competitive retail sales.
It is our position that each one of our retail clients is like our only client. We would rather talk our client out of a location than see them go into a location that we do not think will work for them. Once we determine that a location is the right one for our client, we typically negotiate the business deal from start to finish, including being involved in the lease negotiations up to the store’s final opening.
When we are leasing a shopping center, we treat it as if we are merchandising the center as a department store. You have to evaluate what merchandise lines and specialty retail stores are lacking in the community. You also have to put the right mix of retailers in the shopping center so that there is enough of a varied significant offering to attract customers to the shopping center, which includes the right percentage of apparel stores, restaurants, shoe stores, home furnishings, food stores, grocery stores, etc.
GlobeSt.com: What are your best practices for handling retail real estate leasing transactions?
Welkis: Cover all the bases. If we are marketing a retail real estate property, we expose it to the entire retail and brokerage community. This includes listings on commercial real estate networks such as Co-Star and Loop Net, as well as our website, distributing brochures about the properties to targeted retailers and brokers, cold-calling, canvassing, attending all trade shows and featuring properties in trade shows, etc.
Work hand in hand. When we represent retail chains, we work with our clients as if we were the owners of the company, making ourselves available to them at all hours, maintaining constant communication and updating them on the status of deals with complete follow-through from the start of the deal to the end.
Always on top of market trends. Maintaining a thorough knowledge of our marketplace, including changes on both the retailer and shopping center side, is “Real Estate 101.” You cannot be effective to your retail tenant or shopping center landlord unless you are completely on top of the changes in the marketplace.