Tenants to Malls: Let’s Make a Deal

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There’s a silver lining in every situation. And lately, some mall tenants are trying to create their own.

Amid the weekly news of the latest retail bankruptcy, tenants that are managing to hang on are attempting to capitalize on property owners’ bad fortune. Noting that malls may soon be faced with a glut of soon-to-be empty space, they’re calling property managers to the negotiating table. Some could just be looking for a deal, while others could be facing rents that are truly a deal breaker. For instance, Guess, which has 440 stores in the U.S. and Canada, announced it might cut that number back to 300 as leases expire. And Ascena, which operates Ann Taylor, Loft and Dress Barn, is attempting to negotiate better rates on 400 locations or those doors will have to shutter along with the 250 locations already on the chopping block.

As their neighbors vacate, stores, restaurants and other mall staples are hitting up landlords for lower rents and better terms. Some are having better luck than others. It really just depends on how desirable the tenant is and how hot the real estate. The best malls often have a list of stores looking to take over an abandoned lease. Lesser locations, on the other hand, might be willing to be more flexible—though these days, they have more options as they expand their idea of what makes an ideal tenant.

Restaurants are having more success in these talks given that they’re often a better draw for malls than retail is, as experiences continue to take a bite out of purchases.

“Food operators are negotiating very aggressive deals and they are getting away with it,” Cynthia Murphy, senior vice president at real estate services firm CBRE, told The Wall Street Journal. “More landlords are looking at food as an anchor to create sizzle for their centers.”

Vacancy rates for the first quarter at traditional malls were basically flat with Q4 at 7.9%. And rents were up 0.4%, on par with the previous quarter.

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