Store closures abound, and it may take several years for a return to “normal.” For some businesses, that may be too late. And for landlords looking for successful tenants, there are clearly some segments you may want to avoid. 

From missteps in treatment of customers and staff to poor management and brand direction, here are 3 types of retailers that took a huge hit in 2020:

Luxury Goods

With unemployment numbers floating around 18 million due to furloughs, job cuts, and people forced to quit jobs to provide child care, the country is collectively tightening its belt. Demand for luxury goods has hit a low. Customers looking for value and bargains may make luxury goods an unattractive option when looking for your next tenant. 

Luxury retailer Neiman Marcus has had to file for Chapter 11, and while the high-end retailer seems to be emerging from bankruptcy, it will be a rocky road to full recovery. 

Another luxury brand, Sephora, was hit hard by ill-timed store expansions, high prices, and a ding to their reputation when they let go hundreds of employees en masse on a muted conference call. 

Experiential Brands

Just a year ago experiential retail was buzzing. Customers looking for novel entertainment flocked to escape rooms, axe throwing taverns, trampoline parks, and board game cafes. Not only has expendable income decreased for potential customers, but the risk of contracting an illness at one of these communal businesses has kept many at home—and it’s taken some of the luster from these previously healthy tenants. 

Major gym chain 24 Hour Fitness has been hit particularly hard in 2020. While gyms faced mandatory closures in many states, the brand also made some major missteps. Filing bankruptcy and closing over 100 locations, 24 Hr Fitness faced major flack when they were sued for continuing to charge their members amid the pandemic. 

Department Stores

While numbers for many department stores have been down for years, taking many traditional shopping malls down with them, the pandemic has served a final blow. While many of the large spaces left by their demise have been successfully transformed into multi-use spaces by landlords, finding one large tenant to take the vacant spot may be ill advised. 

Iconic retailers like Macy’s and J.C. Penney have had to close many stores while sales numbers plunged over the last few months. Macy’s will not host Santa at their flagship store this holiday season for the first time in 160 years, and J.C. Penney has recently put themselves into bankruptcy and up for sale. 

While these retail segments may be struggling, plenty of other retailers have risen to the challenging times of 2020. If you’re looking for a healthy tenant who will bring success to your vacancies, schedule your free Retailsphere demo today for the inside scoop. 

The post 3 Retail Segments to Avoid 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.

The post Evicting a No Lease Tenant appeared first on Retailsphere.

The term “Retail Apocalypse” is trending. When you’re looking to fill vacancies, other words like “mass closures” or “bankruptcy” could also elicit an immediate “No thanks!” about certain brands. You may already be facing challenges to your business, and it makes sense that you wouldn’t want to take on a struggling tenant. 

But the truth is there’s more to the story. And you don’t want to miss out on a good fit for your vacancy because of a misunderstanding. Let’s take a look at what bankruptcies and closures can actually mean.

Check the Chapter

First things first, make sure you know what a brand is really dealing with. There are many types of bankruptcy. Most of us are familiar with chapter 7 or 11, but the Bankruptcy Code includes a few others as well. While filing for chapter 7 bankruptcy signals a total liquidation of all the company’s assets, chapter 11 allows the business to stay in business and try to work out its issues with less debt on their balance sheets. 

This means that if a brand that might be a good fit for your vacancy recently filed chapter 11 —they may still be a good fit! The bankruptcy may just be a strategic way to restructure debt, and put them in a better position to be a long-term successful tenant.

Closures Are Strategic

While closures often go hand-in-hand with bankruptcy, these two are not always connected. Bankruptcy of any type can include closures, sometimes on a large scale, but in other situations, closures can be a way of trimming the fat to avoid bankruptcy. 

Brands may be required to close locations where they can’t afford rent, they may need to sell real estate to bail themselves out, or they may simply close stores that have long been unprofitable. All of this means that brands announcing closures—if they’re doing it strategically—might actually be a better choice than other brands that are spread too thin. It’s important to be working with brands who are getting ahead of any issue, especially in the current economic climate, to ensure your long-term business health. 

Smart Expansion

One very strategic reason for closures may actually be expansion. Some brands choose to continue expanding by closing the under-performers to open new stores, despite financial challenges, to boost their cash flow. These changes could be to change the square footage of their stores or move into previously untapped markets. 

Escaping an LBO

Another common cause of bankruptcies lately are companies looking to ease the impact of a leveraged buyout. At some point in their history, many retailers have been purchased by other firms, often private equity firms, who used cheap debt to close the transaction. Even if business is thriving, oftentimes they can’t properly expand and build the business how they’d like to without filing for chapter 11 to escape that debt. 

However, even with all that going on these companies are still a viable option for landlords, as they have proven growth potential. This means that it’s critical that you understand the background of why a company is filing bankruptcy if you want to make the best decisions when it comes to new tenants. 

A Means To An End

Overall, bankruptcy and store closures can both be necessary tools in the evolution of a brand, and they don’t necessarily mark the impending doom often associated with the terms. The finances of a company are often complicated, but when you take a look at the long game, many of these brands will be around far into the future and are still worth offering a lease to. Even a company in bankruptcy could be approached for an expansion deal. 

Interested in researching these brands and understanding what’s going on behind the scenes? Want more insight on brands in bankruptcy, and help figuring out what’s really going on? Our research team is here to help! Schedule a free demo of Retailsphere and let us help you fill your vacant spaces.  

The post What Do Bankruptcy and Closures Really Mean For the Future of Retail? appeared first on Retailsphere.