Pandemic Reaction

Nordstrom isn’t alone in its declining margins and sales; the coronavirus has changed the way consumers shop and interact. A study released by Accenture noted that 85% of consumers surveyed in stabilizing markets, and 86% of those surveyed in advancing markets “are worried about the impact of the pandemic on the economy.” Given that consumer confidence goes hand-in-hand with consumer spending, their worries are, well, worrying. The less secure consumers feel, the less likely they are to spend money. Added to this is ongoing unemployment and furloughs, which puts an additional halt on spending.

So, rather than basking in the success of a marketing strategy that embraced a connected ecosystem and continued experiential retail, Nordstrom found itself taking “actions to meet evolving customer preferences by expanding [their] assortment to reflect growing preferences for categories focused on casualization, comfort, wellness and home,” Nordstrom said, during its recent earnings call.

Rescheduling its anniversary

Another change Nordstrom made in 2020 was to reschedule its popular Anniversary Sale. The sale typically takes place in July, and offers huge markdowns on a variety of goods. This year, the sale was moved to August, “to help ensure the safety and comfort of [their] customers and employees, and to deliver the most relevant merchandise assortment,” Erik Nordstrom said during the earnings call.

Nordstrom went on to suggest that the unofficial results had been very much in line with corporate expectations. However, that shift caused the company’s online arm to take a hit. The specific sales results will be reported in its Q3 2020 earnings report, scheduled to be released in late November.

Where Nordstrom goes from here

Nordstrom executives didn’t provide an outlook in its Q3 earnings call, only suggesting that “we’re confident that we can improve sales trends in the second half of the year and beyond,” President and Chief Brand Officer Pete Nordstrom said, in a press release. Looking ahead to any kind of outlook is difficult, given the current, difficult environment.

While Nordstrom is considered a department store retailer with a relatively good chance of survival, thanks to its robust e-commerce platform and off-price segment, clearly their expansion plans announced in 2019 around their "Local" brand are seeing less traction as physical retail continues to struggle. On the positive side, their discount chain, Nordstrom Rack, has seen traffic begin to come back more quickly than in their other locations. And last year Nordstrom Rack surpassed the flagship brand as highest grossing portion of the business, which combined could be good news for the Nordstrom brand as a whole.

Do you have a large space being vacated by one of the Nordstrom Covid-19 closures? Let Retailsphere help you identify retailers who are continuing to expand and looking for large amounts of retail space. Sign up today for a no-obligation demo and see how much simpler your tenant search can be. 

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Athleta

Staying cozy at home, gyms closed, and virtual meetings are just a few reasons why activewear, particularly Athleta has done well. In March, Fitbit reported a decrease in the number of number of steps users took per day, but accelerated workout activity. Explanation: more people stayed at home, but continued to work out to pass the time in lockdown. Needing work-out garb from Athleta isn't the only reason for increased sales. Leggings, also referred to as yoga pants, have become a fashion staple in women’s apparel, including business casual. Working at home meant workday outfits needed to be more comfy. Video conference? Wear leggings (no one will notice). But not just any leggings will do. Reportedly, Athleta boasts much higher quality than most leggings. And consumer trends have been changing to a minimalist mentality to choose quality over quantity. 

Sweetgreen

Focused on seasonal and sustainable food sources, Sweetgreen was prepared for the COVID season of chaos with a platform for sustainable success. Set in place long before COVID was a concern were the platforms to order online. In fact, pre-Covid, 50% of Sweetgreen’s sales were digital orders. Transferring to mostly digital sales with ease, thanks to the technology in the right place at the right time, Sweetgreen has been able to expand. In April, a new food category, geared towards revving up the dinnertime customers, was released. This year, Sweetgreen has planned 20 new locations. Conscious of the spaces they fill, they “seek to preserve and honor the natural structure of a building, and .. actively seek distinctive spaces with interesting history.” Sweetgreen’s combo of unique spaces, “food ethos”, and streamlined service, thanks to early digital ordering platforms, has set them up for continued championship in the restaurant industry. 

Tropical Smoothie Cafe

Like many brands in the outbreak of Covid, charity came first. Tropical Smoothie Cafe pledged 100,000 smoothies to first responders and hospital workers. They surpassed that pledge and donated 180,000 smoothies. Continuing their generosity, another 1,000,000 smoothies were pledged nationwide. Tropical Smoothie took their charity further by focusing on helping keep franchisee owners afloat. Corporate decreased royalties by 50% and focused on local marketing. Another reason for success during the pandemic was explained by Tropical Smoothie Cafe CEO, Charles Watson, “Consumers are looking for ways to eat healthier because of COVID-19, but they don’t want to sacrifice flavor. Our menu includes incredibly delicious food and smoothies that can be a healthier alternative to traditional QSR options,” Tropical Smoothie Cafe was the perfect choice for a population getting sick of the regular fast food options. 

Tractor Supply Co

When most stores were still in lockdown, Tractor Supply Co was still open. High levels of foot traffic were reported, and one reason could be because they were one of the few places open. However, with a closer look, Tractor Supply happened to have the right products for a lockdown. Bird feed was a very popular item as a result of the surge of birdwatchers during lockdown. Galvanized tanks, typical for feeding livestock, were being purchased and converted to swimming pools. With vacations cancelled, the need for fresh air, and a different environment, more and more people took to the outdoors. Equipment like kayaks and hiking boots were just some more of the items Tractor Supply sold quickly in the throngs of the early COVID era. 

Whether it was having the right plans in place for an easy transition to the new normal, or having the right product for lockdown, these four brands thrived and continue to expand when so much of the economy has suffered due to COVID-19. Our world is in a state of change, desperately seeking a new kind of normal. These brands produce hope that despite national crises there can be success. The next question is how to find brands like these to fill the empty spaces of shopping centers. Retailsphere helps find the thriving tenant, like the ones above, to fill your vacancies. Schedule a demo to find out how.

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Despite the current economic downturn, the fast food market is estimated to reach $931.7 billion by 2027, making the segment highly attractive as tenants that will weather economic and health crises. Interested in bringing a quick service restaurant on as a tenant? Here are 5 fast expanding options you may want to add to your list of prospects. 

Raising Cane’s 

This cult favorite is quickly finding mass appeal. The chain is well known for their chicken fingers, crinkle cut fries, and signature sauce. Raising Cane’s saw an uptick of 22.46% in growth this year. In fact, Raising Cane’s CEO recently shared that after just 30 days, during the height of the pandemic, their sales totally recovered to pre-COVID numbers. This incredible strength and growth makes them a great choice for a strong tenant. 

Tropical Smoothie Cafe  

Not just delicious smoothies, this fast growing cafe also serves up flat breads, wraps, and more to hungry customers. Clocking in a record-breaking summer of sales, Tropical Smoothie had a 22.1% increase across the U.S. in the most recent fiscal year. The company’s CEO recently shared that he felt consumers were turning to the brand for a healthy option during the pandemic. A diverse menu and seasonal specials keep things fresh, and keep up the foot traffic, at Tropical Smoothie. 

Chick-fil-A

Known for its impeccable service and its incredibly long drive thru lines, Chic-fil-A is the perfect tenant for proven success. Ranked as the 3rd fastest growing restaurant chain, customers won’t wait in those lines very long. Efficiency and happy customers are the hallmark of Chic-fil-A. And the brand has diversified during the pandemic to offer popular meal kits. All the more reason for customers to visit the business frequently, and make sure your parking lots are full. 

Jersey Mike's Subs

Jersey Mike’s has seen solid sales growth of 17.8% in 2020. The sub sandwich chain famously invested $150 million nationwide to retrofit its stores for increased safety during the pandemic, and they also recently innovated their delivery and catering services to further guard against contamination. This is a brand that is taking health and safety seriously, and the market is rewarding them. A trustworthy brand like Jersey Mike's could be a great addition to fill your latest vacancy. 

While success is never guaranteed, these brands have proven to be more than profitable during what has been, for most, a very rough year. Interested in learning more? Schedule a Retailsphere demo today and get a more in-depth look at these 5 brands—and many more. 

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In our recent survey of shopping center managers across the country, we asked them which retailers had been most difficult to deal with during the Covid-19 pandemic. Unsurprisingly, 28% of the respondents told us a restaurant had been their most difficult tenant.

In the same survey, we also asked which tenants had been the best during the Covid-19 pandemic. 22% of our respondents told us that a grocery chain was their best tenant. Given the number of people who have been spending more time, including cooking at home, this too isn’t much of a surprise either. Behind grocery chains were specialty retailers and big box retailers, both accounting for 15% of the “best Covid-19 tenants.”

But the best individual tenant according to our survey was Walgreens. 10% of our respondents specifically cited the brand as their best tenant during the pandemic. The only other specific brand to be mentioned more than once was Publix, who also made up 6% of the responses.

Across the board, good tenants have been paying rent on time throughout the pandemic. While this is important, most of our respondents told us that their best tenants were also good communicators who rarely complained. These brands let them know what was happening and didn’t try to avoid talking to the shopping center. 

So how will the pandemic change how these shopping centers fill future vacant spaces?

When we asked what retailers they would focus on moving forward, every single respondent included grocery as one of their target retailers. Jeremy Landsman from Avenue Real Estate

Stated, “The ideal business [moving forward] would be an upscale grocery stores such as Publix or Fresh Market.”

After grocery, 56% of our shopping center respondents told us they would look for more fast food restaurant tenants and 39% told us they would look at pharmacies. And when it comes to the scale of future tenants, 33% of our respondents specifically used the term “national chain” when referring to which retailers they would be looking to fill their vacancies.

While many of our interviewees said that they would try not to let the pandemic affect their leasing practices in the future, Lisa Talley, Property manager for Aria Development in Oklahoma told us, “they will be looking for more essential business and less of the specialty stores when it comes to leasing after Covid19.”

While over time, retail will start to transition back to a state of “normalcy,” the new normal will likely include fewer local brands and specialty shops based on the feedback we’re hearing from shopping centers across the country. Most stores will likely be more oriented towards essential needs, with products shoppers view as necessities.

Are you looking for expanding grocers, pharmacies, or food concepts? Sign up for a no-obligation Retailsphere demo and see how much simpler your retailer search can be.

The post Walgreens and Publix make the best tenants during the Covid-19 Pandemic appeared first on Retailsphere.

Great news. A big national-credit retailer wants a shopping-center space that's currently occupied by struggling mom-and-pop tenants who are barely hanging on in a lease-less, or "at will" basis. The timing seems right to issue these month-to-month occupants their proverbial walking papers and quickly shoo them off the premises to free up the square footage.

Perhaps. But landlords best be prudent, lest such deals get hung up in court. Landlords must still accord their lease-less boarders basic tenants rights before showing them the door. A notice to vacate is still required, among other legal requirements.

However, because there's no formal contract specifying otherwise, landlords need only issue such tenants the typical minimum 30-day notice, less in some states and up to 60 days in others, to quit, according to Stephen Michael White, CEO at RentPrep of Buffalo, New York, a commercial tenant-screening service. And no rationale need be given to evict at-will tenants, White added.

In addition, receipt of the eviction notice must be confirmed, so if landlords don't want to serve such tenants in person, mailing of the notice should be done by certified mail. The notice, following state or local law requirements, must typically state the tenant has to end its occupancy by a specific date of operation. A more expedient exception comes when an at-will tenant isn't paying the rent as agreed, in which case only a 14-day notice usually suffices.

In some instances, a landlord can unwittingly create a written rental agreement via email correspondence with an at-will tenant. Though such agreements are informal, a court may nevertheless find them to be a legally enforceable because they were put in print. Additionally, some jurisdictions this year enacted eviction moratoriums due to COVID-19, though many have expired at this writing.

There are several other legal gray areas to also ponder in the case of at-will tenant eviction, because some local and states laws are situational and subject to court interpretation. Most importantly, landlords must be careful not to break any laws while attempting to evict someone, at-will or not, said White. Actions such as shutting off tenant utilities, changing their locks or forcing them to leave without proper notice aren't legal and can result in judgments against landlords, he added. Non-lawful eviction reasons for commercial tenants include the occupants' racial, religious or familial orientations, their chronic health issues or a retaliation for complaints. Lawful reasons for tenant eviction typically include rent nonpayment, illicit drug use, property damage, health or safety violations, broken agreements, unpaid utility/common-area-maintenance payments, unauthorized pets and the owner moving into the property.

However, landlords must keep in mind that since at-will tenants have no definitive lease, there are no specific lease agreements that the tenant, in the eyes of the court, can actually violate other than rent nonpayment, damage to the property, disturbance of neighboring tenants or the introduction of health hazards to the property, according to Downers Grove, Il.-based O'Flaherty Law.

A tenant filing for bankruptcy can further muddy the waters. In such instances, an automatic stay is typically imposed on creditors, including landlords. Failure to grant such stays in pursuing eviction can lead to penalties and added legal costs, according to James Chen, director of trading and investing content at Investopedia.

Moreover, lessees can become at-will tenants -- also called tenants-at-sufferance -- by default in some cases, particularly when their rental agreements automatically convert them to month-to-month status when they stay past a lease-expiration date, according to business attorney Michelle Seidel, of the law-information website Legal Beagle. A written agreement, should it not specify an expiration date, generally creates a tenancy at will, she said.

Some landlords opt for a "cash for keys" flat-fee approach to avoid navigating the eviction legal system, enticing a tenant to exit faster and without complication. In cash-for-keys, a landlord simply pays a flat fee to tenants in exchange for their keys.

Sometimes there are other solutions to evictions. If a landlord needs an at-will tenant's space, and that business is a decent traffic generator, finding the tenant a different space there or at another center owned by the same landlord might be a wiser alternative, advisors say.

For a sublease tenant in an at-will property, the responsibility for a commercial lease is ultimately between the landlord and original master tenant, notes real estate attorney Manfred Sternberg, of Houston-based Manfred Sternberg and Associates. In most cases, a landlord must give consent to subletting, he said.

If there are pressing questions about at-will tenant rights or other tenant issues, landlords should always consult specific local and state laws, ideally through an attorney, White stressed.

Do you have an at-will lease you're in the process of ending? Looking for expanding retailers in your area to fill that space? Sign up for a no-obligation Retailsphere demo and see how we can help backfill your retail space with potential tenants.

This does not constitute legal advice. We recommend that you consult with legal counsel regarding any eviction process.

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Retailsphere interviewed dozens of shopping center owners and leasing managers nationwide to gain insights into the best, and more interesting, worst tenants during the Coronavirus pandemic. Of those interviewed, 28% noted a restaurant as their most difficult tenant over the past few months.

While the list of difficult restaurants included national brands like Denny’s and California Pizza Kitchen, it was often the smaller local restaurants that caused the most grief. In most cases, they didn’t agree with local regulations requiring them to shut their doors, and when they did, they weren’t ready to handle online ordering, to-go ordering, or curbside pickups. 

Kevin Fechtmeyer, managing partner with Cave Creek Capital Management in Arizona, stated “Some were already struggling in the restaurant business. I can see 20 years ago people would order takeout or delivery at a place like Denny’s. Today there just too many choices and these old restaurants who have not updated their menus in 3 decades are now feeling the pressure.”

Trailing restaurants, clothing stores and salons each made up 15% of the most frequent types of tenants to be difficult to manage. Within the clothing segment, all referenced brands were large national retailers, including Chico’s, J Crew, and Five Below. In many cases, the brands were planning to close the discussed location, exacerbating the problems Covid-19 was creating with even more vacant space.

Joe Pierik, VP of retail leasing for Carpionato Group, said part of this is because “there will be less of a need for big event clothing. There are no sporting events, no concerts, gatherings have limited capacity. We will see more sweatpants and fewer prom dresses as time goes by.”

And it’s no surprise that salons would be in the top 3 most difficult types of tenants to deal with during the pandemic. In a survey completed by Retailsphere at the onset of the Covid-19 pandemic, Salons were most likely to request rent abatement of any other type of retailer. They were also often difficult to communicate with and felt as though they should be considered an “essential business.”

Forrest Holger, director of property management for Midland Atlantic Properties, said “I think some businesses felt that they were more essential than the government did and that really peeved some people off.” 

Across the board, the most difficult retailers had several things in common. They almost always withheld communication or ignored calls and emails, leaving lease managers with little information to go on. When these retailers chose to communicate, it was to secure rent abatement.  

While it may be easy to point out difficult tenants, Retailsphere has also gathered surprising secrets revealed by shopping center owners as they prepare for retail moving forward and who they think are the safest tenants to target for their vacancies. Be on the lookout for our next piece diving into some of the effects Covid-19 has had on retail.

Have you had a difficult tenant during the Coronavirus pandemic? It may be time to backfill their space with prospects. Have you lost a tenant? Let Retailsphere help you fill that vacant space. Sign up today for a no-obligation demo and see how easy filling your vacant spaces can be.

The post Retailsphere Surveys Shopping Center Owners, Reveals the Worst Retail Tenants during Covid-19 appeared first on Retailsphere.

COVID-19 has brought into question how big a role food-and-beverage tenants will continue to play in the long-term vision of using socially oriented, experiential concepts to revive retail real estate.  

The restaurant industry, like many other parts of the economy, enjoyed robust growth until the pandemic struck. Late last year, the National Restaurant Association projected that restaurant sales would increase 4 percent to $889 billion in 2020, based on an upbeat consumer sentiment and an expanding economy. The association also predicted that sales would hit $1.2 trillion by 2030.

But the lockdown in March and the continued spread of the virus have so far forced at least 15,770 restaurants to shut down permanently, according to Yelp. To date, more than 10,000 still remain closed on a temporary basis. To what degree consumers will feel comfortable returning to restaurants without a vaccine – and whether they’ll have the discretionary income to afford eating out – remains unknown.

Food halls, however, may still deliver on the promise of experiential retail. Considered one of the hottest food-and-beverage concepts in the recent past, food halls provide tenants, landlords and consumers with an economic and operating flexibility that isn’t found in conventional restaurant settings, says Phil Colicchio, executive managing director of specialty food and beverage, entertainment, and hospitality consulting retail services for Cushman & Wakefield.

“A lack of interest in food and beverage isn’t behind the catastrophe in the restaurant world, nor is the lack of spending,” Colicchio says. “Food and beverage amenities are still important to real estate development, and food halls are a lower risk way to provide those amenities right now.”

Roughly 223 food halls were operating before the pandemic hit, according to a recentCushman & Wakefield report. About 80 percent remain open in some form or fashion today, adds Colicchio, largely by taking advantage of outdoor patios or by reconfiguring indoor seating. Vendors also were able to transition to a ghost kitchen model for take out.

The 20 percent that have closed are primarily in urban locations that depend on office workers, Colicchio says. Still, the pandemic likely accelerated the predetermined fate of some food halls. In New York, Gansevoort Market in the Meatpacking District closed after six years, although Eater New York notes that the project had struggled to find traction and competed with nearby Chelsea Market food hall.

More than 165 new food halls were being planned before the pandemic, according to Cushman & Wakefield. While some are on hold, many food halls are still moving forward. The group behind Gansevoort reportedly plans to open a food hall in New York’s Oculus shopping and transit center at the World Trade Center. Projects nearing completion or that recently opened include Chattahoochee Food Works in Atlanta, Salt City Market in Syracuse, N.Y., Dr. Murphy’s Food Hall in Chicago, and Castro Valley Marketplace south of Oakland, Calif.

Food halls provide a hedge for everybody involved in the operations, Colicchio explains. Consumers have access to a handful or more of restaurant options at reasonable price points. Vendors can start a business with an investment of some $50,000, which is a fraction of the usual investment required for a standalone restaurant.

From a landlord’s perspective, having a variety of independent operators lessens the likelihood of an entire food hall going dark even if one or two vendors have to be replaced. Plus, the economic model that Colicchio emphasizes reduces the chance that they’ll be surprised by a sudden downturn in business at the food hall. In return for the development of the various vendor spaces, for example, vendors typically agree to pay around 25 percent of their revenue to the landlord to cover rent, utilities, grease trap cleaning and other common area maintenance expenses. As a result, landlords have the ability to monitor vendor sales and costs.

Food halls aren’t a cure-all for all retail real estate settings, Colicchio acknowledges. But he suggests that well-run projects in good locations offer a better bet than other food and beverage options in the market. “Eatertainment” concepts like bowling alleys that feature “a disco ball and that serve blue drinks” are a short-term trend, not a long-term amenity solution, he states.

“I like a blue drink every once in a while, but it’s like an escape room concept – after I go once, I’m probably not going back,” Colicchio declares. “That’s the difference between a trend and a movement.”

Do you have a large vacant space in your shopping center or mall? It could be a good fit for a new food hall. Plenty of table space and smaller kitchens might mean you can bring in new food options even during the Coronavirus pandemic. Start finding smaller local and regional food concepts that could be a fit for your food hall. Schedule your free demo today to see how easy your tenant search can be.

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The COVID-19 pandemic and subsequent widespread orders to close theaters, retailers and restaurants – or severely restrict their operations – are forcing landlords and tenants to the negotiating table to figure out a way to survive. In many cases, the parties are striking agreements that generally provide a period of rent reduction and then spread repayment out over time in the future.In return, shopping center owners typically want tenants to seek additional support, whether it’s a paycheck protection program (PPP) loan or some other type of funding or financial solution, such as reducing payments tied to business debt.

Yet some tenants see the pandemic as a prime opportunity to break their lease and are displaying little interest in working with landlords to find financial aid, says David Greensfelder, founder of Greensfelder Real Estate Strategy, an Albany, Calif.-based provider of strategic planning, market analytics and development services for owners, occupiers and communities nationally.

“If the landlord is being asked to help, it seems completely reasonable that the tenant would be doing what it can to help itself,” says Greensfelder, who also owns retail property. “Tenants trying to hammer a landlord for rent relief but who are unwilling to help themselves, to me that throws up a red flag. That’s somebody who just wants to try to leverage the situation to get out of a long-term contingent liability.”

Negotiating rent relief mid-lease amid a pandemic is a situation that few if any tenants or property owners ever thought they would face. Without the benefit of precedent – or clairvoyance – most landlords are moving cautiously. NewMark Merrill Cos, an owner of more than 80 shopping centers containing 1,600 tenants primarily in California, has reached accommodations with more than 600 of the roughly 850 tenants that sought rent relief, says Sanford D. Sigal, president and CEO of the Woodland Hills, Calif.-based group.

NewMark Merrill helped tenants apply for PPP loans and seek other financial help. But it also has provided relief in “bite-size” tranches, he adds, so that it can maintain flexibility as the virus plays out.

“At the beginning of this pandemic, it was unknown whether this would be a two or three-month situation, or a two-year situation, so our key objective has been to buy time,” Sigal says. “We’ve been able to do that for most, but clearly there is a group of tenants that want to blame someone else for whatever is going on, and that’s not productive.”

Such recalcitrant tenants heighten an already stressful environment. So what can landlords do? While options are limited, the size and financial wherewithal of the tenant and landlord, the value of the tenant to the property, the amount of time left on the lease, and a tenant’s history are among variables that influence decisions. Just as tenants may try to leverage the circumstances to break a lease, for example, property owners may seize the opportunity to cut loose a problematic business.

The best course of action is to work out a solution – within reason – and establishing good communication can help avoid untenable situations, advises Greg Maloney, CEO and president of Retail at JLL Americas in Atlanta. “Tenants sign a binding lease,” he adds, “and landlords expect them to honor their commitment.”

Still, tenants that request rent relief but then balk at providing sales, balance sheet and profit-and-loss data are usually trying to take advantage of the crisis, Greensfelder says. One tenant he worked with took the position that the lease simply didn’t exist after the pandemic took root. But Greensfelder discovered that the tenant was planning to move the business online and planned to use PPP funds to help pay for related salaries.

“The tenant was just trying to get out of its lease and were setting up a negotiation of how much of the remainder of the rent it would pay,” he states.

For tenants that simply refuse to pay rent, lawsuits are one response. Mall owner Simon Property Group took just such an action against The Gap, for example, which held back $115 million in rent payments from Simon and other property owners in April alone.

But determining whether to take matters to court might be more difficult for smaller landlords dealing with regional or local tenants, says Nick Egelanian, president of Baltimore-based SiteWorks, a consulting and outsourcing company that provides services to shopping center owners and tenants.

“In most cases, landlords are making a tactical decision between how much it costs to chase a tenant and how much they might recover,” Egelanian explains. “If it’s a case where there’s a good, longstanding relationship between the two and going after the tenant may force a family into bankruptcy, then landlords may not want to chase them.”

Some tenants demand more relief than what property owners acting in good faith can offer, Sigal says. On those occasions, landlords aren’t wary about taking legal action, although it is generally considered a last resort.

“We’ve worked with tenants 50 different ways to try to keep them successful, or at least alive,” he says. “But if they still want x, y and z and tell us that the responsibility is all on us, then we’re going to get rid of them as soon as we can. That’s not to say we’re going to treat them like the enemy or harass them; we just expect them to live up to their lease.”

Until the virus dissipates, negotiations may only get more “gut-wrenching” for tenants barely squeaking by even after receiving rent relief, Greensfelder warns. That’s particularly true for parts of the country experiencing spikes in infections.

California recently ordered the re-shuttering of malls, fitness centers, hair salons and other indoor venues in 30 counties, as well as bars and the indoor operations of restaurants, movie theaters and museums statewide. Additionally, Texas closed bars, rolled back restaurant occupancy and paused the progression of its reopening. Other states could follow suit.

“The solutions being worked out today may not take retailers to the period when the virus is no longer a factor,” Egelanian adds. “We just don’t know when that will be, and in the meantime, the extent to which consumers venture out will be based on the perceived risks.”

Despite the current struggles and less-than-rosy outlook, retail leasing continues, Greensfelder and Sigal report. NewMark Merrill recently signed a tenant to a 25,000-square-foot formerly vacant space as well as a restaurant.

“I’m not going to lie and say our leasing isn't killing it, but we’re still seeing activity,” Sigal says. “I think the logic is that the pandemic has a finite period, and tenants see an opportunity to finally get into space that they normally wouldn’t be able to.”

“There are definitely retailers looking for space,” Greensfelder declares. “That’s always the case in an environment like this where tenants think they have all kinds of leverage.”

While the current leasing environment is far from optimal, landlords seeking tenants can use Retailsphere to enhance their chances for success. The Retailsphere platform provides access to robust tenant profiles, allowing users to benchmark and compare performance. Its search function also makes it easy to find exactly the right tenant by enabling users to filter and analyze numerous variables, from retail category to a tenant’s preferred demographics. Sign up today for a demo and see how easy the platform can make your tenant search.

The post When Tenants Won’t Help Themselves during the Covid-19 Pandemic appeared first on Retailsphere.

On average, 45% of all salons asked for rent abatement. Fitness related brands and franchises both had an average of 15.7% of locations ask for rent abatement. The least rent abatement was seen in child-related retail, with an average of only 7.7% of retail locations making requests.

Survey respondents assumed these categories most frequently asked for abatements as a result of frequent forced closures, and in many cases, state mandated delays in re-opening.  These delays have been especially problematic for gyms. One Florida management group said, “fitness gyms that offer basketball, pickleball and racquetball have a harder time bouncing back because of the restrictions. We’ve seen 55% of our fitness tenants request rent abatement as a result.”

When you compare the East versus the Western United States, rent abatement requests become a bit more interesting. Both regions had almost the same average request rate, 16.9% average on the East coast and 16.4% average on the West coast. Both regions still saw salons making up the largest portion of the rent abatement requests, followed by fitness and then franchise tenants.

The West coast, however, saw larger averages in food, fitness, and franchises than the East coast.  The East coast saw higher averages of rent abatement requests in salon, child-related, national brands, and medical retail tenants than the West coast. 

Salon retail was the category with the largest difference between geographies, with East coast salons making rent abatement requests an average of 8% more often than the West coast. The next largest difference was in medical retail tenants, again with East coast tenants making abatement requests 5.4% more often than their West coast counterparts. The category where the West coast most outpaced the East was in food and restaurants, with an average of 4.8% more rent abatement requests.

When interviewed, Mark Brutten of Brixton Capital, said “The restaurant industry was able to stay open, but some restaurants were not prepared for take out only and delivery. Some ran out of take out supplies and because the warehouses they get their food trays from were closed, they could not replenish. A lot of essential businesses were not even thought of as essential and were forced to close.“

There is no question, the Coronavirus pandemic has put additional stress on many stores already struggling. As many stores have been forced to stay closed, this stress has now started to impact shopping centers and retail commercial real estate groups. Rent abatement requests may just be the beginning of the turmoil many of these locations will face before Covid-19 restrictions begin to lift. 

Retailsphere will continue to perform outreach and survey for information related to Covid-19 rent abatements and restrictions and will update on our blog. If you’re interested in learning more about Retailsphere’s data collection and research team, reach out to Retailsphere today to speak to someone about our extensive retailer database or request a personalized demo.

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Retail has a long history of adapting to changing economic conditions, though profound industry change has never come as quickly as in the past dozen years, as the Great Recession, the rise of Amazon and now the COVID-19 pandemic have rocked physical stores, forcing shopping centers and tenants into a rapid succession of adjustments.Out of the recession sprang a strong value orientation and from the Amazon expansion came new online-proof dining and entertainment experiences, plus an "if you can't beat 'em, join 'em" foray into e-commerce from retail tenants.

But what now? The coronavirus, which continues to make consumers cautious of en-masse gatherings, poses a continuing existential threat to physical retail that's likely to reverberate for years to come and force a battery of unprecedented challenges.

"What we see in front of us for a recovery in this case, is unlike anything any of us have had to endure or experience for over 100 years," said Keith Jelinek, managing director in the global retail practice at consulting firm Berkeley Research Group, in an interview with the online publication, Retail Customer Experience.

While the global pandemic threat will eventually pass and business operations will return to normalcy stage by stage, the odds are that retail customer experiences and interactions will be vastly different moving forward, he said. "The current crisis should serve as a reminder to all retailers and consumer-product and service companies that having a worst-case-scenario plan is an important part of critical strategic planning," Jelinek said.

The slow and uncertain return of customers to shopping centers is making it very difficult to project staffing and inventory needs for owners, Jelinek said. Moreover, seasonal and trending fashion merchandise, as well as such things as sports-league apparel, have mostly passed their peaks languishing on shelves during COVID-19 shutdowns and will need to be moved at a loss as new product is brought in, Jelinek said. "It will take time, and that time will require the generation of liquidity and access to capital," he added. Moreover, seasonal-buy plans that vendors would typically project for the next year will be much harder to orchestrate, given the possibility of another wave of the coronavirus, Jelinek said.

On the macro level, retailers and other consumer-goods and service companies must now routinely assess potential threats and challenges globally, and do so through "a logical set of steps that build their capability to sustain the impact and then to rebound," Jelinek said.

Technology that will help create completely touch-less stores, including the checkout process, will be on the minds of retailers and consumers alike. That can be achieved, at least in part, "through stronger retailer apps that also create brand loyalty and clarify the value proposition of a brand," said Karly Iacono, who heads the Iacono Retail Group of retail-investment-property specialist Marcus & Millichap, in her video, "Retail Bankruptcies and the Path Forward."

Heat mapping and other store-use surveillance that shows where consumers are most frequently congregating and how long they're staying there, will be critical in creating a safe environment, said Iacono, in the May video. "This could be extremely useful if we have to continue social distancing to see how the flow of the store is working and if there are any bottlenecks," said Iacono.

Smart retailers will be able to use those same processes to streamline their product lines and amplify their value propositions, plus determine what products are of interest, what layout changes needs to be made and what parts of a shop customers aren't getting to from a flow perspective, she said.

As centers reopen, new logistical strategies are being used to make common areas and food courts safer, including spacing of seating to allow social distancing, quicker removal of food trays, repetitive cleaning of high-use areas, addition of hand sanitizing stations and signage that promotes distancing; plus the creation and diplomatic enforcement of new occupancy maximums, among other measures, according to Cushman & Wakefield's Recovery Readiness for Retail Properties guide. Enhanced tenant communications about safety, sanitation, hygiene and disposal practices, as well as crucial information about how both employees and customers can minimize the touching of merchandise, will all need to be issued.

To emerge from the present turmoil and get through the next year to 18 months, retailers will need a lot of extra cash on hand, meaning they'll have to be especially mindful about their budgets and financial statements and any expansion plans, said Iacono. They'd also be well advised to consider strategic innovations that could both make them more competitive and optimize existing real estate, she added.

For example, Gap is moving into furniture and baby product lines, Target is piloting same-day shipping to compete with Amazon, Bed Bath & Beyond has turned 25% of its stores into shipping hubs with no retail, Walgreen is expanding into ophthalmological services and Walmart is expanding into health services, Iacono said.

At the small-store level, retailers are surviving the COVID-19 slowdown by doing such things as delivering purchases to customers, making curb-side pickup available, facilitating online payment, and photographing a targeted range of store products to send to customers, according to the National Retail Federation. Those practices should continue when such businesses return to normal hours, the federation said.

It's still too early to tell what shopping centers tenant mixes will look like post-coronavirus, given ongoing tenant financial fallout. Before the widespread closures, the percentage of food tenants in shopping centers had been rising steadily, from the old standard of about 3%, to 10% in 2019, with many newer centers committing up to 15% of property to eateries, according to a JLL survey. Younger patrons in particular, said JLL, were keen on supporting community-based restaurants and merchants, though some of those may not be able to emerge from coronavirus-related shutdowns.

Physical stores, despite the bump given to online retail experiences during the pandemic, will remain the most powerful sales channel, as well as the most measurable and manageable, said Doug Stephens, author of "The Retail Revival: Re-Imagining Business for the New Age of Consumerism" and "Reengineering Retail: The Future of Selling in a Post-Digital World," in an interview with Retail Dive.

Stephens, who also goes by "the Retail Prophet," said physical stores are still the first point of contact between consumers and brands the vast majority of the time. "As consumers become increasingly technologically entrenched, they'll crave far more and better physical retail experiences," he said. "And so brick-and-mortar spaces will (continue to) offer retailers and brands the opportunity to draw the consumer into the brand story, deliver a remarkable and immersive brand and product experience, and ultimately galvanize their relationship with consumers."

Stephens adds that the future of retail will likely "see complete integration of technologies like augmented and virtual reality, the internet of things, sensor-driven packaging and connected appliances." For greater efficiency, chain retailers will probably push forward initiatives allowing them to ship products to customers from any of their stores, Jelinek added.

Store customers returning after COVID-19 shutdowns are more likely to re-adapt quicker to open-air centers than enclosed ones, Jelinek said. Meanwhile, re-opening shopkeepers are faced with the realization that all interfaces between store associates and consumers need to be tweaked to put safety at the forefront, including handling of shopping carts, dressing room usage, handling of cash and credit cards and installation of clear dividers at POS terminals.

Jelinek concluded: "Retail always manages to adapt."

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