According to an article in Retail Traffic, major big-box retailers have informed about 700 shopping center owners that they will be reducing their rent 25%, no questions asked. Included in the letter was their first rent check, at the reduced rate. Owners and retailers have both been hurting in this poor US economy and each are trying to keep their head above water by reaching a common ground. With vacancy rates rising and retail sales decreasing, roles have switched from the past ten years and retailers are now setting the precedent.
Owners, however are giving pushback and evaluating who actually needs and deserves the rent relief. This issue has caused a dilemma for owners; either decrease their income or have a chance at losing the retailer entirely.
How does the owner know that the retailer relies on rent relief for the longevity of their business, not just because their next door neighbor received it? According to the article "you can always tell which retailers really need help because they're willing to give up some of the options they have in their lease.”
Skoda Minotti asks: Is it time to restructure using percentage rents or lowering the break point for overage rents? Whatever the answer, communication between landlord and tenant is imperative.
Has your rent changed over the past year? Have you and your landlord adjusted your rent to meet at a common ground? Leave us a comment and let us know.
Looking for a Cleveland or Akron accounting firm that provide services to the real estate industry? Contact the Real Estate and Construction Group at Skoda Minotti at 440-449-6800.
Topics: Cleveland Real Estate Accounting