What Permanent Changes Do YOU See For Retail Leases?

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Today Ruminations’ blog posting, our 480th, will be different from all that have come before. We’re making it our readers’ blog posting.

Since March 11, we’ve seen only the supermarket (with our laundry-dry cleaning, and mail drop concessionaire), the same hardware store (twice), an outdoor herb nursery (once), and a warehouse store (once). We picked up an order from a fishmonger, giving us a glimpse (from outdoors) of its back office. That’s two months – five retailers at most. No take-out, though we admit to a lot of on-line shopping from a behemoth seller-selling platform.

So, we have no idea as to what is really happening on the “retail” ground. Reading about the retail marketplace is unhelpful. Some would say that press coverage is filtered through political pathways. That must be true, but we think the bigger filter is that for media outlets to survive, “news” has to be interesting. Certainly, adding a dose of “politics” can make it so, but far, far more often it is a lot simpler than that. “Dog bites man” isn’t very interesting. “Man bites dog,” now, that’s a story. Translated to today’s subject, media reports focus on the unusual, not the humdrum, ordinary.

So, here’s today’s request. At the bottom of today’s (and every) post is a feature allowing readers to post their thoughts and comments. Please share your experiences with your Ruminations family – our other readers. If you normally read this blog on Linked-In, through Facebook or by way of other outlets (as many readers do), please go to the prime blog site and add your comments. Basically, what do you personally see happening on the ground? Many of us are looking at the trees because we can’t see the forest. If enough of us describe the trees we see, collectively, we’ll learn about the forest.

Some areas are reopening much sooner than others. Let us all know what the seedlings look like and how you think their trees will turn out. Here are some suggested approaches.

In locations where retail marketplaces have been “reopened,” what kind of stores have opened? What kind haven’t?

  • What are open retailers doing differently? What changes do you think will be permanent?
  • What are landlords doing? Are they standing back and watching the “action,” or have they done things like reconfiguring common areas, increased cleaning and maintenance, changed security or parking lot management?
  • Have landlords “intervened” in their tenant’s activities? Have new Rules and Regulations been promulgated?
  • Have leases been amended, beyond rent changes, in response to what we are seeing?
  • How many current retailers will survive? Which types? What do the early trends suggest to you?
  • Most importantly, are you seeing any clues as to what the “permanent, post-COVID-19” future” will look like for leases, tenants, landlords?

We beseech you. Our interest is about “technical, business” thoughts. We are confident that almost all of our readers share that interest. Please save political comments, legitimate as they are, for other outlets. There is no shortage of those. We know this is a “hot topic” in the outside world. But, when we look at a Venn diagram of our readers, the overlapping area, the one that represents our common interest, is the “business” of retail real estate.

Stay well.

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Comments

  1. Steve Cross says

    Hello to Ira and this community. I’m a landlord of a modest office building with 12 tenants – all in service industries. For those that were affected by our Governor’s shelter-in-place order, I preemptively forgave rents and, in one case, cancelled a just-signed lease.

    Why do this? 1. Because all involved should share in the financial pain. 2. Tenants are people first, and will remember those that were helpful during this pandemic as well as those that were not.

    In closing, good tenants should be shown they are valued in meaningful ways, and not just during the good times.

  2. I have one client that has developed a force majeure clause that uses every word he could possibly think of to cover viruses and pandemics.
    i

  3. Marc Ripp says

    Force majeure clauses will no longer be relegated to the back pages of the Lease or to its Miscellaneous section. I am already seeing heightened scrutiny being paid to the drafting and negotiating of this clause in new documents.

    Beware, though. Some of the proposed language is well-intentioned, but overly broad and ambiguous, such as “any health emergency”. Query: is a Store Manager’s excruciating toothache that necessitates an immediate visit to an oral surgeon the type of episode for which the afflicted party may legitimately invoke the force majeure clause? For an excellent sample force majeure clause that is both comprehensive and balanced, see The Habitat Group’s recent Special Report on Covid 19 and Commercial Leases published in Commercial Lease Law Insider.

  4. Richard Doherty says

    This is what I have observed: I live 50 miles north of San Francisco in Sonoma County, CA–largely a rural environment dominated by small businesses, tourist, wine industry and craft brewing. It is also becoming a Cannabis friendly (albeit highly regulated) business center. Ca is in the first phase of opening non-essential business under very specific guidance.

    We have visited about every 2 weeks our local–non-chain grocery/meat market, and Rite-Aid, Costco twice and our veterinarian once. Every location requires masks be worn with no exceptions, employees are masked and gloved. Costco and Rite-aid have erected shields at check-out locations and restrict the number of people using a one in one out cadence. Both have cart handle wipes available at the story entrance

    No stores allow carry-in bags or containers. Our local grocer does not have shields at check-out but has increased the distance between register and card reader. They are sanitizing card readers and check out counters after each customer and have one employee at the entry sanitizing baskets and carts before the are provided.

    From my perspective this is giving them a competitive advantage versus the supermarkets who do not have the same the same perceived level of care.

    The vet ( this is a 6 Dr practice) has staff masked/gloved/gowned that bring the patient into the facility and return the animal to you at your vehicle. Only staff enters the facility.

    They make contact via smart phone. Many businesses are relying on texting to schedule and conduct business. The new phase is curb-side pick-up, again texting dependant, for what are perceived as low risk, low contact business.

  5. I thought this (short) article was a good snapshot of how different types of businesses are being impacted. I personally have an office in this building and have been here in the building since 2002. It is a historic conversion mixed use building with a hotel, residential apartments, office tenants, a restaurant and a coffee shop. The Grand Rapids, MI MSA is about 1 Million in population so these observations don’t necessarily carry over to larger markets, but interesting reading. https://mibiz.com/sections/real-estate-development/grand-rapids-waters-building-fortunate-to-avoid-major-disruptions

  6. Stephan Cutler says

    Trader Joes in my neighborhood has implemented the following:

    1) Adjusted store hours so that from 8am-9am, only seniors and those with disbilities may shop; 9 am – 8 pm anyone may shop.

    2) Only 40 customers are permitted in the store any any one time.

    3) All workers where facemasks and gloves.

    4) Customers must wear face-masks.

    5) Employees wipe down the shopping certs before they are handed over to customers.

    6) Customers are offered hand sanitizer when they enter the store.

    7) There are shields at check-out locations and customers may not empty their shopping basket or bag their groceries (it is all done by the check-out clerk).

    8) No outside bags are permitted.

    9) There are marks on the floor near the checkout area and outside the store where customers line-up to identify 6′ intervals to increase the distance between people.

    10) For a period of time, they were also restricting customers to not more than 2 of the exact same item. For example, not more than 2 jars of peanut butter, not more than 2 cartons of large eggs, not more than 2 small containers of blueberries. But you could buy 2 cartons of large eggs, 2 cartons of extra large large eggs, 2 cartons of jumbo eggs. You could also differentiate between the product size and brand. SO the limitation was not reallt that restrictive.

    Bottom line, all the measures were sensible and made me fell more comfortable about shopping at the store.

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