Retail owners are strategically negotiation lease terminations with struggling tenants. During the pandemic, tenants that have faced challenges in the last year and don't show signs of recovery are often happy to exit the lease. Simultaneously, landlords are able to reclaim retail units and backfill them with better fitting tenants—and potentially higher rents.

"Some retail developers are being proactive in dealing with existing space by negotiating early lease terminations with struggling tenants who do not see things turning around anytime soon," Dan Villalpando, a partner at Cox, Castle & Nicholson, tells GlobeSt.com. "These developers are seeking to strategically take back certain spaces prior to the natural expiration of the applicable leases in order to remerchandise with better tenants and higher rents."

This has been a popular trend with big box and mid-sized tenants that are looking to reduce their footprint in certain locations. This opens the door for better performing tenants to expand. "Some "mid-box" or "junior anchor" tenants like PetSmart and Staples, who are looking to downsize their footprints, may be willing to give space back early, allowing landlords to aggregate enough square footage to attract certain hot retailers in an effort to revitalize their shopping centers," says Villalpando. "Some new concepts that might be positioned to absorb excess space in 2021 include health and wellness, pet services, automobile showrooms and salon suites."

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.