Mike Osorio

Retailers Seek Rent Cuts

March 11, 2009

FROM RETAILWIRE:
Sleepy's: the Mattress Professionals recently sent out a letter to its 700 landlords across the East Coast requesting a whopping 25 percent reduction in its rent payments. Should all retailers expect to be able to negotiate rent cuts this year? How might the pressure for large-scale rent reductions affect shopping center operators?      [more...]

Unfortunately many (most?) retailer-landlord relationships are adversarial which only creates lose-lose negotiation results. The forward-thinking retailers and landlords have proactively reached out to each other to discuss how to weather this storm together. Rent reductions must be considered on a case by case basis, taking into account the trends in traffic and spending.

A typical win-win result is a temporary reduction in rents tied to traffic and spending trends with key milestone dates for review. It is reasonable for the retailer to request temporary relief while traffic and spending remain tough. It is also reasonable for the landlord to see the retailer's financials to verify the situation.

The message is to aggressively negotiate in a manner that ensures the relationship is solid for the long-term benefit of both landlord and retailer.