Retailers Assess Doing Deals in the Downturn

LAS VEGAS-Some retailers are still growing today despite the downturn, but they face a different environment in terms of doing deals than they did when the economy was roaring. And that doesn’t necessarily mean that they can call their own tune in lease negotiations because the recession has emptied out a lot of retail space, panelists pointed out at an ICSC panel Sunday at RECon, the annual ICSC spring conference here at the Las Vegas Convention Center.

For example, panelist Debbie Ferrell, senior manager of real estate channel development for T-Mobile, pointed out that the company has a “very aggressive” expansion plan for 200 new locations this year, but faces some challenges in finding those locations. For one, landlords often want longer lease terms. For another, T-Mobile is looking for “A” locations and “It’s a challenge to find them,” she said―when such sites are available, landlords are often holding out for higher rents.

The panelists generally agreed that although rental rates are obviously one of their chief concerns in lease negotiations, other items on their negotiating lists can be sticking points too. Ferrell pointed out, for example, that exclusivity is a big concern of T-Mobile, as is co-tenancy. “When we go into a center and there are only a handful of tenants, that’s a big challenge because, at the end of the day, we need foot traffic,” she said. Ferrell added that, in addition to exclusivity, marketing is an important concern for T-Mobile because the company likes to be able to stage grand openings, which require landlord consent for any marketing activities outside of the retailer’s own space.

Panel moderator Bob Riggles, director of Real Estate for the Great Clips chain, asked the panelists if they were negotiating any package deals with landlords who own multiple centers, and the response was unanimous. The panel members said that in almost all cases they prefer one-off deals because package deals almost always require them to take some spaces they would rather not take. “The deal has to stand on its own,” said Dan DePace, senior director of real estate and lease administration for Office Depot.