Tenant & Landlord Relationships
Moving Toward a Partnership Model
As e-commerce continues to grow, retail investors and tenants are being forced to reconsider what consumers gain from the brick and mortar shopping experience. Traditionally, landlord and tenant relationships were ultimately transactional. Today, the sides are teaming up, realizing that together, they can achieve a shopping experience worthy of drawing consumers away from their smart phones and devices.
Changing Lease Terms
At the core of the tenant-landlord relationship are lease terms. As new concepts like pop-ups and store-within-a-store become more commonplace, both retailers and landlords are increasingly willing to experiment. , Five-year lease terms with three-year kickouts provide more flexibility for both sides, while short-term leases allow brands to try new concepts with less risk. Shopping centers and malls, in turn, get to keep their tenant mix fresh to drive traffic and attract new visitors. As retailers and landlords continue to experiment, lease standards are likely to evolve.
With e-commerce threatening traditional retailer models, the onus on the landlord to generate foot traffic is increasing. To retain retailers and generate buzz, landlords are turning to concierge services to entice consumers to visit their properties. Services like valet parking, curbside pickup and daycare are beginning to become commonplace in high-end shopping districts. Another potential addition: Return services that bring shoppers’ unwanted purchases back to stores. Amid these changes, retailers are linking their e-commerce efforts and their stores by allowing consumers to buy online with same-day pickup in store, or alternatively, to purchase online with free in-store returns. CBRE’s 2016 Placemaking report cited a PwC survey that found 58 percent of respondents opted to shop online because it’s convenient. Landlords and tenants are responding by offering their own version of in-store conveniences.
Over the next 5-10 years, e-commerce will continue to grow and exert pressure on retail industry players to adapt their brick-and-mortar environments. Expect increased collaboration between retailers and landlords as both sides work together to develop new and innovative strategies to attract and retain customers. Each asset is unique, and a coordinated and complementary strategy between those occupying space and those managing it, will be key to success.
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