Landlords are tightening up their expectations of tenants as retailers' business practices are strengthening.
Leasing activity is increasing, and confidence is up! New tenants are turning the once-dark vacancies into new opportunities and, with this increased activity, landlords' outlooks and expectations for their shopping centers have shifted once again.
About 209,000 square feet of space was absorbed in the fourth quarter of 2013, according to a published report. Quoted lease rates leveled off at $14.54 per square foot, another sign of recovery.
When the market was at its weakest, some landlords agreed to rent reductions for struggling tenants. The lower amounts were often supported with proof of modifications made to business practices in a slowed economy.
While this practice helped several tenants survive, it did not attract tenants to shopping centers. Therefore, landlords were more apt to negotiate creative deal structures in an effort to entice new occupants. The combination of rent reductions and new deal structures helped several shopping centers, landlords and tenants to endure the prolonged recession.
Now, with an upswing in the economy, newfound confidence, and strength in prospects, landlords have started turning down requests for rent reductions to existing tenants and are returning to more traditional lease economics.
In addition, landlords appear to be less forgiving of non-paying tenants, and for good reason: Qualified prospects are actively backfilling vacancies. Tenants that have inconsistently paid rents, those making partial payments, and non-payers are seeing harsher consequences.
Collection efforts for current and past-due balances have increased, with some landlords engaging the services of attorneys and debt collectors. Landlords also seem to be more comfortable with filing for evictions, knowing prospects are seeking relocation and expansion opportunities.
Higher occupancy levels at shopping centers — 90 percent at the end of last year, according to one report — are beginning to restore the confidence in tenants and consumers alike. Brown paper-covered windows, a sight that once illustrated failure, now stimulate a new-found interest and hope.
The opening of storefronts offers existing tenants the opportunity to re-energize their existing customers and capture new ones. Trader Joe's is coming to Jacksonville Beach, Fla; Regency Centers has committed to Jacksonville, Fla.'s Riverside Avenue project; Earth Fare is also building a store in Jacksonville; and Fresh Market is adding a store in Brooklyn, a neighborhood in Jacksonville.
Increased activity at shopping centers makes for more satisfied tenants and stronger businesses, which positively affects the bottom line for tenants and landlords, and restores trust in their property managers.
— Dawn Barlow is an area manager for Franklin Street Management Services, managing both commercial retail and office assets. She can be reached at Dawn.Barlow@FranklinSt.com or at 904-271-4120, ext. 804.