Is Now the Time for Independent Tenants?

We attended the ICSC New York National Conference yesterday, and the mood was, uh, cautious at best. One the one hand, you had ICSC executives promising members good hotel deals at the Spring Convention in Vegas, on the other hand, J. Crew CEO Mickey Drexler, head of one of the only apparel chains have current success, was far from optimistic.

But we did find one common theme of hope shared by the few developers we talked to on the trade floor.

As the major national chains are scaling back (or eliminating) their expansion plans, we’re starting to see a resurgence of the Moms and Pops out there. It seems that these operations, which can vary from any type of specialty store imaginable to high-end restaurants, have been waiting in the wings for their chance to enter shopping centers after being shut out, as a group, by the nationals.

Of course, we hear that there are all sorts of risks associated with these operations. Their credit can be shaky at best, the illness of a family member can totally destroy a venture and one developer even told me that you have to put on the hat of a psychologist when dealing with inexperienced shop owners.

But could this be a good opportunity during the recession that might even make our centers more interesting?


11 Responses to “Is Now the Time for Independent Tenants?”

  1. 1 Chris December 9, 2008 at 9:42 am

    There are going to be a lot of experienced, smart Baby Boomers out there not ready to retire, maybe laid off that are going to take the plunge and try to open a retail shop or venue. Yes, handholding will be required and turnover will occur but with the glut of vacant space, now is the time for developers to share the risk. Make sure they have an e-commerce site up and running for 6 months before you let them into your centers. That shows commitment and allows for kinks in business plan to be worked out before they start paying rent.

  2. 2 dan December 9, 2008 at 9:44 am

    developers are talking “ma and pa” because ANY deal is worth having. if you abandoned local tenants, you missed the boat anyways. they bring a local flavor to any tenant mix. nothing has changed in terms of their shortcommings. however, when there’s no business out there it doesn’t make a difference who the tenant is. however, locals are more hands on and will find a way to make it happen. your due diligence needs to be more detailed and personal.

  3. 3 JG December 9, 2008 at 10:23 am

    A little understanding and cooperation in tough times goes a long way with local tenants. While they may require more attention and TLC, they are always a needed part of the center. Besides, when is the last time local management and marketing had cooperation and understanding from the nationals?

  4. 4 Steven December 9, 2008 at 11:00 am

    Down with big box! Hooray for Mom and Pop! Dan is right – any deal is worth having these days. “Local flavor” in the tenant mix will be the key to a development’s success.

  5. 5 James December 9, 2008 at 11:33 am

    I have had a good experience with these tenants when I do my homework on them. If they are opening a third or fourth location in our center that is a good sign. If it is their first venture but they bought a franchise, they have good personal credit, are responsible people, and they are well capitalized, thats a good sign.
    If they have a big ego, the greatest new idea since the telephone, and they try to convince you they will need at least 60 locations in the next two years, that is a very bad sign, run don’t walk in the other direction.

  6. 6 Fred December 9, 2008 at 12:40 pm

    Iam always in favour of so called M&P tenants,The centers need different flavours, we all had enough of seeing the same shops in every center.and James i agree with you 100%,

  7. 7 Climberx December 9, 2008 at 5:02 pm

    here’s hoping the mom & pops can backfill all the national chain stores that will be shutting down immediately after the holidays.

  8. 8 Randy Christensen December 9, 2008 at 6:16 pm

    Developers that have had the foresight and positioned themselves with a strong well-rounded center are staying strong in the rapidly declining market. Let’s face it many developers have made deals based on $$$$ and not stability. You can’t put in two competing business of the same type in the same shopping center and expect them to survive. Developers should try and build a well rounded shopping experience that keeps the customers cross shopping throughout the center. The mom and pop stores have always been specialty tenants and although they may need special attention and help sometimes they put their heart and soul into the business. Mom and pop business also have a friendlier approach to the customer and are more likely to give better service.

  9. 9 James December 9, 2008 at 8:15 pm

    Theaters share their Gross sale figures with each other through their Distribution Association, Big Box stores should do the same, it might prevent some of the cannabalization of the trade area and work positively to keep the stores healthy in good times and bad. Failing and closed stores are not good for the community, investors, or the businesses themselves. I personally am real tired of CEO’s who flop their b-lls on the conference table declaring they can out perform in their industry when in fact they can’t. Remember my comments about “phantom vacancy”, well sooner or later that vacancy becomes real and our community and our investment suffers as a result. Plus, as a developer, I am real tired of being treated like a shyster and a crook, when in fact, I have my tender B-lls on the line with every deal I do.

  10. 10 Larry Ortega December 10, 2008 at 9:58 am

    We will again see the rise of the independent retailers and they will come to the rescue of the savy landlords. I’m sure there will be a resurgence of small business owners who have been laid off from various retail and restaurant operations. Do we have to “handhold” and educate them? Absolutely. Who else is going to take all the excess capacity of shopping centers across North America. Are they going to compete with WalMart?Best Buy? or any other “Box” tenant? No, but it will be new “Ideas” emerging out of all the “Time” we have now that there is No money and No Jobs. So Ideas and Time are all that is left. I kind of laugh now when I hear a landlord ask me if “they are a credit tenant”? Can anyone answer that question given the bankrupcies we will see after Christmas.

    All the best

  11. 11 Dealmaker December 11, 2008 at 9:54 am

    If we go down this path, it will radically change the operations and more particularly the financing practices of our industry. Mom and Pops are great (but risky & finicky. We once used them to fill entire malls…then came the chain stores with higher sales and better credit. Now the pendulum of time..swings back once again.

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